Wunderlich Upgrades American Eagle To Buy, Expects To Outperform Expectations

Google Trends data indicates that American Eagle Outfitters (NYSE: AEO) is poised to beat 2Q expectations, despite challenging comps, Wunderlich’s Eric Beder said in a report. He upgraded the rating on the company from Hold to Buy, while raising the price target from $13 to $22.

Upside Potential In 2Q

Google Trends data indicates upside potential for American Eagle in 2Q. “Of the 10 brands we analyzed via the statistical/linear-regression process, American Eagle posted the highest YoY growth in search-term interest, with Google search popularity for the teen retail brand increasing 7.9% YoY,” analyst Beder wrote.

This would mark the fourth consecutive quarter of positive y/y gains for the brand, and the seventh straight quarter of sequentially better y/y search-term trends.

There appears to be a 52 percent probability of American Eagle generating at least 6 percent revenue growth in the quarter, which is significantly higher than the consensus expectation of 2.6 percent growth. There is also a 95 percent probability of the company reported at least 2.1 percent sales growth for 2Q, Beder mentioned.

The data highlights that the company is “moving even closer to a lifestyle brand focused business with an emphasis on denim and innovation,” the analyst commented, while adding, “Given that 2Q faces the toughest comparisons (a +11% comp in the corresponding quarter) for the fiscal year, by far, we believe a result this strong would lead investors to view AEO even more favorably.”

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