American Eagle Gains on Takeover Chatter

American Eagle Outfitters is the latest retailer on the receiving end of takeover rumors.
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NEW YORK (

TheStreet

) --

American Eagle Outfitters

(AEO) - Get Report

is the latest retailer in the midst of takeover chatter.

The teen retailer saw call trading reach a nine-month high on the speculation. One name being thrown around as a potential acquirer of American Eagle is private-equity firm

Blackstone Group

(BX) - Get Report

.

Shares of American Eagle jumped 4.2% to close on Wednesday at $12.84. The retailer is scheduled to report its second-quarter earnings on Aug. 25.

While this rumor may catch some investors off guard, Wall Street Strategies analyst Brian Sozzi says it could be a very real possibility. "Given American Eagle's valuation, in addition to the health of its balance sheet, they

are a prime takeover candidate," Sozzi said.

American Eagle's stock has been hammered, down 24% for the year-to-date period. Aside from rival

Aeropostale

(ARO)

, it also has the lowest valuation of the teen sector, Sozzi notes.

The retailer also has a lot of cash, no bank debt, viable concepts in its namesake and children's brands and a management team that hasn't executed properly, all of which add to a possible buyout, Sozzi said.

"I see private equity as a buyer here," he said. "Department stores shed teen apparel brands years ago and I am sure are dealing with their own headwinds with the consumer spending backdrop and bloated debt positions from years of over expansion."

So what's your take on American Eagle as a takeover target? Take our poll below, to see what

TheStreet

is taking away from the rumors.

-- Reported by Jeanine Poggi in New York.

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