Shares of American Eagle Outfitters Inc. (AEO) surged 5.1% in afternoon trading on Wednesday, reaching their highest level in 20 months. This upward momentum came after BofA Securities analyst Christopher Nardone reversed his bearish outlook just one week before the company is set to announce its fiscal third-quarter results.

Previously holding an underperform rating since July 2022, Nardone upgraded his stance to neutral and increased his stock price target to $19. Nardone had been the most pessimistic analyst on Wall Street, with his previous target of $12.50 being the lowest among the 12 analysts surveyed by FactSet.

While there remains one analyst who remains bearish on the stock, with a price target of $14, eight analysts are neutral and three are bullish. This mix of sentiment sets the stage for American Eagle Outfitters' upcoming earnings report on November 21.

Nardone's upgrade is primarily driven by his expectation of "near-term momentum for upward estimate revisions." He believes the company's revenue will exceed expectations, contributing to positive revisions in future estimates. Currently, the FactSet consensus for fiscal third-quarter revenue stands at $1.28 billion, an increase from the previous consensus of $1.22 billion recorded in July.

With its stock reaching the highest close since March 2, 2022, American Eagle Outfitters has experienced a remarkable year with gains of 40.3% year-to-date. In comparison, the S&P 500 index has seen a gain of 17.4%.

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