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Credit Suisse Analyst: Abercrombie Leads Rival American Eagle

by: FP Trading Desk October 06, 2008 | about stocks: AEO / ANF    

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Who will win the teen fashion turf war?

Analyst Paul LeJuez of Credit Suisse has placed his bets on Abercrombie & Fitch Co. (ANF), saying it comes out ahead of rival American Eagle Outfitters (AEO) because the former appears to be weighted down more substantially by pessimistic stock assumptions, even though both look like a cheap buy on common value metrics such as price to earnings ratio.

"The relationship between the two companies enterprise values is nearly one to one,” versus an historical average premium of 60% for Abercrombie over American Eagle, he wrote in a note to clients, and both are facing the same challenges to their top and bottom line. Abercrombie’s stock is down 53% this year, while American Eagle’s is down 28%.

The analyst said:

In addition, Abercrombie has managed its new store growth (and capital) more prudently, while American Eagle continues to grow aggressively despite the environment.

He rates both mid-cap teen apparel stocks as "neutral," noting “it is an understatement to say that the market has been volatile.” His price target for both remained the same, with Abercrombie at $55 and American Eagle at $17.

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This article has 2 comments:

  •  
    Oct 09 02:49 PM
    After taking a position in AEO, buying in (when the insiders were making acquisitions @ $22.00), we wisely dumped the stock at $ 15.25 - $ 16. After this experience following the lead of the insiders, it proved they didn't, they don't, and they won't know how to lead the company to improvement and make money for stockholders. Stay away from purchasing stock in this company whatever the cost, even below today's price of $10.85.
    Reply
  •  
    Nov 10 03:21 AM
    it useful knowledge
    Reply
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