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.