American Eagle Outfitters stock price forecast for September as US retailers recover

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Sep 16, 2021
  • US retail sales for August increased by 15.1% from the same month last year, and 0.7% sequentially.
  • Several retail stocks spiked following the announcement with American Eagle Outfitters rising 2.5%.
  • However, the stock still trades at an attractive forward P/E ratio of 10.95.

On Thursday, American Eagle Outfitters Inc. (NYSE:AEO) shares surged 2.5% after the August report on US retail sales showed an increase of 15.1% from the same month a year ago. In addition, last month’s sales also increased 0.7% from the previous month, indicating sequential growth.

Clothing stores registered the highest growth after sales increased 39% year-over-year, riding on the back of back-to-school and back-to-work trends. As a result, US clothing stores could witness significant top-line growth for Q3, led by American Eagle.

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However, the AEO stock is still down more than 29% from its all-time high of $38.90 reached on 23rd April, meaning it could still rally to increased this year’s gains. 

The American Eagle Outfitters stock is up 35.58% year-to-date.

The AEO stock looks significantly undervalued

Although American Eagle Outfitters shares are up more than 35% this year, the stock still trades at an exciting P/E ratio of 19.04, making it attractive to value investors. Moreover, its forward P/E ratio of just 10.95 suggests the stock is unlikely to be a value trap.

However, with analysts expecting earnings per share to fall by more than 212% this year before rising by a 7.97% next year, growth investors could opt for alternatives in the market. As a result, American Eagle seems like a good short-term buy.

Source – TradingView

American Eagle Outfitters shares seem poised for an extended rebound

Technically, American Eagle shares seem to be trading within a descending channel formation in the intraday chart. However, the stock has recently bounced off the trendline support to avoid slipping to oversold conditions.

Despite the rebound, the stock still has more room left to run upwards before hitting overbought conditions. As a result, investors can target extended short-term gains at about $28.78 or higher at $30.87. 

On the other hand, if the rebound does not materialise, a pullback could find support at $24.90 or lower at $22.70.

Bottom line: why buy American Eagle Outfitters shares now?

In summary, although American Eagle shares seem to be experiencing bearish pressure, the recent rebound provided an opportunity for buyers to profit on the upswing. Moreover, the stock looks significantly undervalued, making it attractive for value investors.

Therefore, with AEO shares trading several levels below the overbought conditions, investors could buy the stock for the short-term before it retests one of the resistance levels.

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