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On Monday, TD Cowen maintained a Market Perform rating. american eagle outfitters (NYSE:) and raised their price target from $21.00 to $23.00. The adjustment follows American Eagle's fiscal 2023 fourth-quarter earnings per share (EPS), which exceeded expectations by 11 cents due to higher gross margin.
The company also provided fiscal 2024 and first quarter 2024 guidance that beat analyst expectations.
American Eagle's management targets a compound annual growth rate (CAGR) of 3% to 5%, EBIT (earnings before interest and taxes) growth in the mid-to-high teens, and an EBIT margin of approximately 10%. The company announced an overview of its three-year strategic plan with financial goals. 10% by 2026.
TD Cowen acknowledged that the company could achieve these goals if it could maintain consistent low-single-digit growth rates.
The company also recognized that American Eagle's lingerie and activewear brand, Aerie, had an opportunity to expand in the activewear market due to its strong brand positioning. But as the American Eagle brand expanded into tops and adjacent product categories, concerns arose about potential fashion and inventory risks.
Additionally, there is some skepticism about American Eagle's ability to meet its 300 basis point margin expansion target over the next three years, given that commodity margins have already reached what analysts consider their peak levels. .
TD Cowen's revised price target of $23.00 is based on a second-year price-to-earnings ratio of approximately 12 times and the company's fiscal 2025 EPS estimate of $1.92. According to the company's valuation, this valuation is in line with historical averages of approximately 12x P/E and approximately 7x enterprise value to EBITDA, suggesting limited potential for valuation expansion. It is said that there is.
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