What Happened?

Shares of young adult apparel retailer American Eagle Outfitters (NYSE: AEO) jumped 5.5% in the afternoon session after Barclays raised its price target on the company to $24 from $20. 

The investment bank noted a constructive view on the specialty retail sector, pointing to disciplined inventory management and favorable economic factors like lower interest rates and gas prices. Despite the higher price target, Barclays kept an "Underweight" rating on the shares. The firm told investors that careful stock selection remained critical due to continued uncertainty in consumer demand. In a separate filing, a company director acquired 1,896 share units, with each unit equivalent to one share of common stock.

After the initial pop the shares cooled down to $28.07, up 4.5% from previous close.

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What Is The Market Telling Us

American Eagle’s shares are extremely volatile and have had 36 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 26 days ago when the stock gained 3.3% on the news that Goldman Sachs initiated coverage on the stock with a Neutral rating and a $25 price target. 

Even with a "Neutral" rating, the start of coverage by a major bank drew positive attention to the retailer. The investment bank noted that American Eagle was set to benefit from its relatively high-income customer base and shoppers' good views on product pricing and value. This loyalty helped the company achieve an impressive 144% price return over the six months prior to the announcement. Goldman Sachs also pointed to signs of a strong year-end performance, based on much higher comparable sales over the Black Friday period.

American Eagle is up 6.5% since the beginning of the year, and at $28.07 per share, has set a new 52-week high. Investors who bought $1,000 worth of American Eagle’s shares 5 years ago would now be looking at an investment worth $1,283.

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