American Eagle Outfitters, Inc. (AEO): A Bull Case Theory

We came across a bullish thesis on American Eagle Outfitters, Inc. on Valueinvestorsclub.com by dsteiner84. In this article, we will summarize the bulls’ thesis on AEO. American Eagle Outfitters, Inc.'s share was trading at $19.63 as of September 15th. AEO’s trailing and forward P/E were 17.98 and 20.16 respectively according to Yahoo Finance.

American Eagle Outfitters (AEO) presents an attractive entry point following a sharp decline in its stock after the high-profile Sydney Sweeney ad campaign. The company is a Gen Z-focused retailer, with its core American Eagle brand generating roughly two-thirds of total sales, while the remaining third comes from its Aerie and OFFLINE by Aerie brands, which focus on intimates, activewear, and loungewear.

Aerie, historically the faster-growing engine within AEO, doubled revenue from 2019–2024 but faced a challenging first quarter due to fashion misses, inventory issues, tariff fears, and adverse weather, leading to declining sales and a $75 million inventory write-off. Despite this, management completed a $200 million accelerated share repurchase, reducing the share count by almost 10%, which positions the company for improved per-share metrics.

AEO’s diverse supply chain across more than 20 countries, with nearly all manufacturing exiting China by year-end, mitigates tariff exposure. The Sydney Sweeney “Has Great Jeans” campaign, launched for back-to-school, has driven unprecedented online traffic and in-store visits, with limited-edition products selling out rapidly. While some backlash emerged, the heightened visibility is expected to translate into meaningful sales growth.

The company maintains a clean balance sheet, pays a $0.50 annual dividend, and continues disciplined capital allocation toward buybacks, dividends, and selective store expansion for Aerie and OFFLINE. The stock is heavily shorted, and expectations are low, creating potential upside if Aerie returns to its growth trajectory, OFFLINE continues expansion, and stronger back-to-school performance drives earnings to $1.50 next year. Risks include consumer spending weakness, inventory missteps, and potential ad campaign fatigue. Overall, AEO offers a compelling risk/reward setup, supported by a lower share count, strategic brand positioning, and catalysts from the Sydney Sweeney campaign and seasonal merchandising improvements.

Previously we covered a bullish thesis on lululemon athletica inc. (LULU) by FeedbackAlarmed5045 in May 2025, which highlighted the company’s strong competitive moat, premium pricing power, and expanding men’s apparel and international footprint. The company's stock price has depreciated approximately by 42.81% since our coverage. The thesis still stands as LULU continues to execute strategically. dsteiner84 shares a similar bullish perspective but emphasizes American Eagle Outfitters’ Gen Z-focused positioning, recovery after product missteps, and catalysts from the Sydney Sweeney ad campaign.

American Eagle Outfitters, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 41 hedge fund portfolios held AEO at the end of the second quarter which was 35 in the previous quarter. While we acknowledge the potential of AEO as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy NOW

Disclosure: None.