American Eagle Outfitters (AEO) Stock Jumps on Blowout Earnings—Key Levels and Buy Signals to Watch

American Eagle Outfitters’ (NYSE:AEO) shares opened the week hovering around $10.70—just pennies above their 52-week low—after sliding more than 40 % year-to-date as investors brace for another rocky earnings season. The sell-off accelerated in late May when the teen-apparel retailer posted a first-quarter GAAP operating loss of $85 million and scrapped its full-year outlook, citing “macro uncertainty” and heavy discounting to clear excess inventory. Gross margin compressed to 29.6 %, down more than 1,000 basis points from the prior year, underscoring how rising freight and promotional costs are pressuring profitability. Traders are now fixated on the next catalyst: fiscal second-quarter results, scheduled for release the week of 27 August 2025, according to the company’s historical reporting cadence. Wall Street currently expects earnings of $0.13 per share on roughly flat revenue, but the consensus has edged lower in the past month as channel checks show a cautious back-to-school environment. Valuation is where the bull case starts. At roughly 9 × projected 2025 EPS and 0.4 × sales, AEO trades at a steep discount to specialty-retail peers despite a 4.6 % forward dividend yield that management has reiterated even after the spring guidance withdrawal. Twelve analysts tracked by MarketBeat still assign an average 12-month price target of $14.70—implying about 37 % upside from current levels—while the most optimistic call sits at $28, nearly triple today’s quote. Technically, the stock is testing support near $10.50, an area that has contained every sell-off since 2020. A decisive break could expose the pandemic lows around $8, but a short-interest ratio north of 9 days to cover suggests any positive earnings surprise could spark a sharp rebound. Key issues to watch when management reports later this month: • Inventory levels and promotional cadence during the peak denim and fleece season. • Progress on cost-cutting initiatives that are targeting $150 million in annual savings. • Early read-through on fall traffic at the company’s American Eagle and Aerie banners, especially after June foot-traffic data signaled mid-single-digit declines industry-wide. • Impact of potential tariff shifts as U.S.–China trade negotiations evolve. Bottom line: AEO stock sits at the intersection of turnaround potential and recession risk. If margins stabilize and back-to-school demand holds, the beaten-down retailer could finally give bargain hunters a reason to reload. But with consumer wallets tightening and guidance clarity still lacking, volatility is likely to remain the season’s must-have accessory for American Eagle shareholders.