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JPMorgan is turning less bullish on American Eagle Outfitters despite the stock’s rally last week. The bank downgraded shares of the retailer to an underweight rating from neutral in a Monday note. Analyst Matthew Boss also established a December 2026 price target of $9, indicating shares could fall 23% from their Friday closing price. Shares of American Eagle soared 4% each last Thursday and Friday after announcing that actress Sydney Sweeney would headline a fall campaign . These gains helped American Eagle join the meme stock mania that has overtaken the market over the past few weeks. But despite this rally, shares are still down 30% this year. AEO YTD mountain AEO YTD chart Looking ahead, Boss noted several obstacles that could drag down gross margins, including foreign exchange, tariff and price markdown headwinds. Reception to American Eagle’s spring and summer products has also been more lukewarm than anticipated. “Management cited an expanding customer file and traffic growth across brands, while conversion rates & lower AUR primarily drove the -3% comp decline as the Spring/Summer product assortment did not resonate as planned,” he wrote. “Importantly into 2Q, management noted a relatively unchanged Spring/Summer product assortment (vs. 1Q), with ongoing challenges notably within seasonal categories (Shorts at AE & Swim at Aerie) in addition to Fleece (mis-executed price vs. product at Aerie), supporting our consistent -3% 2Q comp.” Boss added that the company had to offer further markdowns in order to clear its spring and summer inventory. This approach could continue into the second half of this year. “Management noted a ‘wait & see’ approach on 2H25 promotions, with uncertainty in 2H25 on the consumer’s receptivity to price action (w/ planned 2H pricing increases to offset the cost of tariffs which was quantified as $40M on the full year), in addition to the Fall/Holiday product assortment with the ‘test’ being the month of August,” he added.
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