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Morning Bell With Jim Cramer: Fly to American Eagle Outfitters

Jim Cramer talks stock market news, including American Eagle Outfitters and the 2021 Child Tax Credit.

Stock futures moved higher Thursday as Wall Street weighed continued Federal Reserve support and awaited a batch of U.S. economic data. 

On the retail front, TheStreet Founder Jim Cramer spoke with Katherine Ross about fashion retailer American Eagle Outfitters  (AEO) - Get American Eagle Outfitters, Inc. Report, which was recently added to the Action Alerts PLUS investing club portfolio.

American Eagle Outfitters: Buy Right Now

Cramer did not mince words when it came to his feelings about the Pittsburgh specialty retailer. "I strongly recommend people buy it right now," he said.

Cramer said one of the reasons he was so enthusiastic about the company, which sells clothing and other items under the American Eagle and Aerie brands, is the 2021 Child Tax Credit.

The recently passed third stimulus relief package, known as the American Rescue Plan, expanded the Child Tax Credit, and roughly 36 million American families on July 15 will start receiving monthly checks from the IRS.

Eligible families will receive up to $1,800 cash through December.

"It’s very clear that there is going to be another spur in spend and that’s another reason why we picked American Eagle Outfitters," Cramer said.

At last check the shares were trading 1.6% higher at $37.41.

TheStreet Recommends

Cramer cited J.P. Morgan analyst Matthew Boss's "excellent piece" on American Eagle.

Boss, who has an overweight rating on the stock with a $48 price target, raised his second-quarter-earnings expectation to 55 cents a share, above the 51-cent Wall Street consensus.

The analyst said he saw "additional upside" to his second-half model driven by the Child Tax Credit, among other factors.

Near term, Boss said, management remains very confident in the core AE brand under Chief Creative Officer Jennifer Foyle's leadership. 

He sees "a strong back-to-school assortment hitting in the next couple of weeks, paired coincidentally with the first round of Child Tax Credit stimulus checks, driving revenue above prepandemic levels for the rest of 2021 by our model." 

American Eagle Outfitters shares earlier this week rose when the actress Brooke Shields posted a photo of herself and her two daughters in new swimwear from the company's Aerie intimates brand.

Last month, American Eagle's first-quarter-earnings report missed Wall Street's expectations. In April, several analysts raised their price targets on the company.

American Eagle Outfitters is a holding in the Action Alerts PLUS portfolio of Jim Cramer's charitable trust. Hear what Jim Cramer is telling members of his Action Alerts PLUS investing club in Wednesday's Daily Rundown.