What Happened?

Shares of young adult apparel retailer American Eagle Outfitters (AEO) fell 16.3% in the morning session after the company reported disappointing third-quarter earnings. Revenue and gross margin missed in the quarter. The real bad news was the guidance, though. The company expects same-store sales and operating profit well below Wall Street's estimates for the all-important holiday quarter. Overall, this was a weaker quarter. 

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy American Eagle? Access our full analysis report here, it’s free.

What The Market Is Telling Us

American Eagle’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. Moves this big are rare for American Eagle and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 9 months ago when the stock gained 14.8% on the news that the company reported fourth-quarter results, which exceeded analysts' revenue and EPS expectations. Outperformance was driven by its Aerie brand, which saw same-store sales growth of 13% compared to 6% for the flagship American Eagle brand, which is still good. 

 Looking ahead, management expects revenue to rise by 3% in the full year 2024, falling short of analysts' estimates. However, its forecasted full-year operating income of $455 million easily cleared analysts' expectations of $362 million. Overall, this quarter's results seemed fairly positive, and shareholders should feel optimistic.

American Eagle is down 16.8% since the beginning of the year, and at $17.63 per share, it is trading 32.7% below its 52-week high of $26.20 from March 2024. Investors who bought $1,000 worth of American Eagle’s shares 5 years ago would now be looking at an investment worth $1,168. 

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