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Vitalii Liubimov's Avatar
published in Blogs
Feb 11, 2021

Mall-Based Apparel Retailers with Sell Ratings Because of Fundamentals

Traditional shopping malls and the retailers that operate in them have been struggling for a number of years as consumers have shifted their shopping preferences. This shift was going on well before the pandemic hit and now it appears the health crisis has only made things worse. Among the companies that are struggling are two apparel retailers that caught my eye because they are overbought on their daily charts—American Eagle Outfitters (AEO) and Gap, Inc. (GPS). American Eagle is also overbought on its weekly chart.

After looking at the charts for these two stocks, I started doing more research to see what other indicators showed. Both companies are pretty weak on the fundamental side with American Eagle getting negative marks in four categories and it doesn’t have any positive marks on the fundamental side. Tickeron’s AI based rating system ranks the stock as a “sell”. The company gets poor marks in its Outlook Rating, SMR Rating, P/E Growth Rating, and Seasonality Score.

Gap has two negative scores and three positive scores, but one of the areas with a negative mark is the SMR rating. I find the SMR rating especially valuable in my evaluations. The other area where the company scores poorly is in the Profit vs. Risk Rating.

I mentioned earlier that the stocks were overbought on their daily charts and that is based on the daily stochastic indicators. Both stocks have been in overbought territory for three days. Both stocks have received bearish signals from their RSI indicators recently and Gap received a bearish signal from the Aroon Indicator a few weeks back. American Eagle received a bearish signal from its Bollinger Bands last week.  

Both American Eagle and Gap are expected to report fourth quarter earnings during the first week of March. American Eagle’s earnings are expected to come in flat compared to last year and up a penny from the third quarter. Gap’s earnings are expected to drop sharply compared to last year. The company reported EPS of $0.58 in Q4 2019 and the consensus estimate for Q4 2020 is $0.17. Gap earned $0.25 per share in Q3 2020.

A complete comparison and the exact ratings numbers appear below.

Related Ticker: AEO

AEO's RSI Oscillator entering oversold zone

The RSI Oscillator for AEO moved into overbought territory on June 14, 2024. Be on the watch for a price drop or consolidation in the future -- when this happens, think about selling the stock or exploring put options.

Price Prediction Chart

Technical Analysis (Indicators)

Bullish Trend Analysis

The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 8 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where AEO advanced for three days, in of 329 cases, the price rose further within the following month. The odds of a continued upward trend are .

AEO may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.

Bearish Trend Analysis

The Momentum Indicator moved below the 0 level on May 16, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on AEO as a result. In of 93 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .

The Moving Average Convergence Divergence Histogram (MACD) for AEO turned negative on May 16, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 51 similar instances when the indicator turned negative. In of the 51 cases the stock turned lower in the days that followed. This puts the odds of success at .

AEO moved below its 50-day moving average on May 30, 2024 date and that indicates a change from an upward trend to a downward trend.

The 10-day moving average for AEO crossed bearishly below the 50-day moving average on May 22, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 12 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .

Following a 3-day decline, the stock is projected to fall further. Considering past instances where AEO declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .

The Aroon Indicator for AEO entered a downward trend on June 14, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.

Fundamental Analysis (Ratings)

Fear & Greed

The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (2.974) is normal, around the industry mean (3.930). P/E Ratio (30.465) is within average values for comparable stocks, (102.859). AEO's Projected Growth (PEG Ratio) (0.000) is very low in comparison to the industry average of (1.444). Dividend Yield (0.016) settles around the average of (0.027) among similar stocks. P/S Ratio (0.980) is also within normal values, averaging (2.038).

The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. AEO’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.

The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.

The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.

The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. AEO’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 74, placing this stock worse than average.

Notable companies

The most notable companies in this group are TJX Companies (NYSE:TJX), lululemon athletica (NASDAQ:LULU), Gap (The) (NYSE:GPS), Abercrombie & Fitch Co (NYSE:ANF), Foot Locker (NYSE:FL), Guess (NYSE:GES), Stitch Fix (NASDAQ:SFIX).

Industry description

Companies in the apparel and/or footwear retail industry sell clothing, accessories and footwear, for different age groups and genders. The industry’s product categories could range from basics, such as underwear, to luxury items. Some retailers source items from wholesalers or an apparel brand to sell in their stores; some others are licensed to make and market their own retail goods under particular brands. Several companies outsource production of clothing to developing/emerging economies where labor costs are relatively inexpensive. Apparel retail is often influenced by fashion trends, and many companies feel the need to adapt to what’s “in vogue” to retain customers and attract new ones. A major disruption in this industry has been the burgeoning trend in digital shopping – to compete with rapidly growing e-commerce, even traditional retail players are upping the ante on their online platforms. Much of the products’ performance in apparel/footwear retail is cyclical, i.e., economic boom times encourage consumer spending, while recessions induce thriftiness among people. Some large-cap U.S. apparel/footwear retail companies include TJX Companies Inc., Ross Stores, Inc., Lululemon Athletica Inc. and Burlington Stores, Inc.

Market Cap

The average market capitalization across the Apparel/Footwear Retail Industry is 12.67B. The market cap for tickers in the group ranges from 256K to 119.4B. IDEXY holds the highest valuation in this group at 119.4B. The lowest valued company is DESTQ at 256K.

High and low price notable news

The average weekly price growth across all stocks in the Apparel/Footwear Retail Industry was -2%. For the same Industry, the average monthly price growth was -2%, and the average quarterly price growth was 47%. MRPLY experienced the highest price growth at 8%, while PLCE experienced the biggest fall at -18%.

Volume

The average weekly volume growth across all stocks in the Apparel/Footwear Retail Industry was -18%. For the same stocks of the Industry, the average monthly volume growth was 3% and the average quarterly volume growth was -55%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 54
P/E Growth Rating: 44
Price Growth Rating: 52
SMR Rating: 65
Profit Risk Rating: 74
Seasonality Score: 4 (-100 ... +100)
Related Portfolios: REIT - RETAIL
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General Information

an operator of specialty retail stores

Industry ApparelFootwearRetail

Profile
Fundamentals
Details
Industry
Apparel Or Footwear Retail
Address
77 Hot Metal Street
Phone
+1 412 432-3300
Employees
43100
Web
https://www.aeo-inc.com
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