Buy The Dip In American Eagle, Citi Says In Upgrade

With the retailer's stock down by about 30 percent since its second-quarter report in late August, investors should consider buying American Eagle Outfitters (NYSE: AEO), according to Citi.

The Analyst

Citi's Paul Lejuez upgraded American Eagle Outfitters from Neutral to Buy with a new $27 price target.

The Thesis

American Eagle is wrongfully being "painted with the same brush" as other struggling retailers, Lejuez said in the upgrade note. (See his track record here.)

The company is one of the most attractive concepts in the sector, and its Aerie unit continues to steal share in the lingerie market, the analyst said. 

Aerie isn't receiving the recognition it deserves for consistent double-digit comp growth and momentum moving forward, Lejuez said. The Aerie business alone should be valued at $2 billion, which implies the remaining core business is valued at 3.1 times EV/EBITDA — an "overly pessimistic" perspective, in Citi's view. 

Price Action

American Eagle shares were up 0.86 percent at $21.12 at the time of publication Friday.

Related Links:

Wedbush: American Eagle Bull Case Is Priced Into The Stock

UBS Initiates Coverage On Apparel Retailers, Calls Aerie A $2 Billion Brand

Photo by Dwight Burdette via Wikimedia.