Summary:
• American Eagle (NYSE:AEO) fell 11% on Wednesday, after the company offered earnings guidance that missed Wall Street expectations.
• Based on its market cycles, we believe the stock will face further downside risk in the coming months.
The company reported earnings per share of $0.39 and total revenue of $1.04 billion, compared to analyst estimates of $0.32 and $1.01 billion. Management projected earnings for the current quarter in the range of $0.47-0.49 below the $0.52 consensus.
CEO Jay Schottenstein explained that, “We are better positioned than ever to capitalize on the continued disruption across the retail industry.” Yet he did not offer an explanation for the lower than expected guidance.
Our approach to stock analysis uses market cycles to project price action. Our analysis is that the stock’s “wings were clipped” when it broke below the point at which it started the current cycle, which is a bearish indicator. Our target is below $12.50 by November.
For more from Slim, or to learn about cycle analysis, check out the askSlim Market Week show every Friday on our YouTube channel.