Why American Eagle Outfitters Stock Soared 45% Higher This Week

Key Points

• The popular retailer crushed the consensus estimate for profitability in its second quarter.

• It also convincingly beat on the top line.

• 10 stocks we like better than American Eagle Outfitters ›

In any given week on the stock exchange, there are high flyers, and there are high flyers. Happily for American Eagle Outfitters (NYSE: AEO), their company was in the latter category over the past few days.

Buoyed by satisfying quarterly results and subsequent analyst price target raises, American Eagle's shares increased by more than 45% in value, according to data compiled by S&P Global Market Intelligence.

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The power of marketing

Wednesday was lift-off day, as that's when American Eagle published its second-quarter figures. The clothing retailer's revenue actually lost altitude by coming in at $1.28 billion, although the year-over-year drop was not significant at 1%. Generally accepted accounting principles (GAAP) net income rose incrementally to perch at $77.6 million, or $0.45 per share.

Image source: Getty Images.

Both line items were more than good enough to beat the average analyst estimates. The consensus for revenue among professional American Eagle trackers was $1.23 billion, while that for profitability was merely $0.20 per share.

In the earnings release, the company attributed the significantly better-than-anticipated performance to increased demand, reduced spending on promotions, and greater control with expenses. A high-profile marketing campaign featuring actor Sydney Sweeney also brought attention to the retailer, as did an accompanying effort with recently engaged football star Travis Kelce.

Ascending Aerie

After those earnings hit the headlines, several analysts wasted little time getting more bullish on American Eagle.

Among these was UBS pundit Jay Sole, who raised his price target on the stock to $21.50 per share from his previous $19. In doing so, he maintained his buy recommendation. According to reports, while Sole acknowledged the positive effect of the Sweeney and Kelce ads, he pointed to the company's relatively new Aerie brand, which has resonated with the company's customers.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends American Eagle Outfitters. The Motley Fool has a disclosure policy.