NEW YORK (
American Eagle Outfitters
is a prime takeover target, according to
Rumors emerged this week that the teen retailer was being eyed by private equity, sending shares up 8.4% to close at $13.05 on Friday. An overwhelming majority of investors -- 73.6% -- said American Eagle is ripe for a buyout.
It's easy to see why. "Given American Eagle's valuation, in addition to the health of its balance sheet, they
are a prime takeover candidate," Wall Street Strategies analyst Brian Sozzi said.
American Eagle's stock has been hammered, down 24% for the year-to-date period. Aside from rival
, 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.
One name being thrown around as a potential acquirer of American Eagle is private-equity firm
But there are still 26.4% who believe an Eagle deal wouldn't be the right move. Historically, there has been little interest in the teen sector from private-equity. The teen retail space is also cyclical, and American Eagle has a boat load of its own internal issues it needs to sort out.
When it comes to a strategic buyer, that's even less likely. "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," Sozzi said.
American Eagle is set to report its second-quarter earnings results next week, and investors will be waiting for some color on inventory levels. Analysts are forecasting a profit of 13 cents a share on revenue of $654 million.
-- Reported by Jeanine Poggi in New York.
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