What Happened?
Shares of young adult apparel retailer American Eagle Outfitters (NYSE: AEO) jumped 5.1% in the morning session after the company announced a collaboration with NFL star tight end Travis Kelce.
The apparel company is launching a limited-edition product line, “AE x Tru Kolors by Travis Kelce,” in partnership with the athlete's sportswear and lifestyle brand. This collaboration is viewed as a strategic move to deepen the company's connection with Gen Z consumers and enhance its relevance in lifestyle fashion. The announcement generated significant investor optimism, especially as Kelce's public profile has been amplified by his recent engagement to pop star Taylor Swift.
After the initial pop the shares cooled down to $12.76, up 4.9% from previous close.
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What Is The Market Telling Us
American Eagle’s shares are very volatile and have had 26 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock dropped 3.5% on the news that Bank of America downgraded the apparel maker to 'Underperform' from 'Neutral'.
The downgrade came from Bank of America analyst Christopher Nardone, who also trimmed the firm's price target on the stock to $10 from $11. The bank cited concerns over the impact of higher tariffs and slowing sales at the company's activewear brand, Aerie. In line with this outlook, Bank of America reduced its earnings per share (EPS) estimates for American Eagle for fiscal years 2025 and 2026 by 8% and 30%, respectively. The firm noted that it foresees a "longer path to more normalized earnings in the current environment" for the apparel maker.
American Eagle is down 25.5% since the beginning of the year, and at $12.76 per share, it is trading 43.8% below its 52-week high of $22.70 from August 2024. Investors who bought $1,000 worth of American Eagle’s shares 5 years ago would now be looking at an investment worth $1,063.
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