$AEO Looks To Be A Good Risk/Reward Play
AEO has a multiple bottom in place and is on the verge of breaking out of the downtrend line. With the stock trading at just 9.7x earnings, there's been talk of M&A happening in the beaten-down retail space. Citi sees M&A optionality with Abercrombie & Fitch (NYSE:ANF). The firm thinks Amazon (NASDAQ:AMZN) should take a look at an acquisition or a merger with American Eagle Outfitters (NYSE:AEO) should be considered.Also within the apparel sector - PVH (NYSE:PVH), V.F. Corp. (NYSE:VFC) and Capri Holdings (NYSE:CPRI) are seen as potential buyers of an attractive brand like Decker Outdoors' (NYSE:DECK) Hoka brand or Oxford Industries' (NYSE:OXM) Tommy Bahama, Lilly Pulitzer and Southern Tide brands. Columbia Sportswear (NASDAQ:COLM) and L Brands' Victoria's Secret business (NYSE:LB) are mentioned as potential targets.
There's also room for short covering as 14.5% of the float is short.
American Eagle Outfitters, Inc. operates as a specialty retailer that provides clothing, accessories, and personal care products under the American Eagle and Aerie brands. The company also provides jeans, and other apparel and accessories for men and women; and intimates, activewear, and swim collections, as well as personal care products for women. In addition, it offers sports apparel under the Tailgate brand; and menswear products under the Todd Snyder New York brand name. As of March 6, 2019, it operated approximately 934 American Eagle stores, 262 Aerie stores, 5 Tailgate stand-alone stores, and 1 Todd Snyder stand-alone store in the United States, Canada, Mexico, China, and Hong Kong. It also ships to 81 countries through its Websites; and offers its merchandise at 231 locations operated by licensees in 24 countries, as well as provides products through its Websites ae.com, aerie.com, and ToddSnyder.com. American Eagle Outfitters, Inc. was founded in 1977 and is headquartered in Pittsburgh, Pennsylvania.
As always, trade with caution and use protective stops.
Good luck to all!
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