Bank of America Downgrades American Eagle Stock Amid Tariff Concerns, Citing Negative Impact and Lack of Pricing Power.

American Eagle's stock has been downgraded to "underperform" by Bank of America, citing the negative impact of tariffs on the company's profits. The bank has lowered its price target to $10, 21% below current levels, and expects tariffs to lower gross profits by $40 million this fiscal year. Analysts believe the company's jeans campaign featuring Sydney Sweeney will not be enough to counteract the drag from tariffs.

American Eagle Outfitters (AEO) has faced a significant setback as Bank of America (BofA) downgraded the company's stock to "underperform" from "neutral" ahead of its second-quarter earnings release on September 3. The downgrade is attributed to the anticipated negative impact of tariffs on the retailer's profits and the limited pricing power of its brands, American Eagle and Aerie [1].

Christopher Nardone, an analyst at BofA, cited the boost from the recent Sydney Sweeney ad campaign as a temporary sales driver. However, he warned that this momentum will be short-lived due to the higher tariffs that will siphon off the benefits. The bank has lowered its price target for AEO shares to $10, indicating a potential 21% downside from current levels [2].

The analyst noted that American Eagle and Aerie are struggling to navigate the tariffs and lack significant pricing power. This, combined with the low-hanging fruit already achieved in cost-cutting measures, leaves the company with few levers to pull. The bank expects tariffs to lower gross profits by $40 million this fiscal year, further exacerbating the company's financial outlook [2].

BofA also cut its earnings per share (EPS) estimates by 8% for 2025 and by 30% for 2026, reflecting the anticipated impact of tariffs and lower Aerie sales. The analyst noted that the Sydney Sweeney campaign, while successful in the short term, is unlikely to fully inflect the business over the long run [1].

American Eagle's stock has been volatile in recent months. After the Sydney Sweeney campaign launched in July, shares climbed as much as 33%, but the stock is still down 23% year-to-date. The company's stock has lost 43% in the past 12 months [3].

References:
[1] https://www.cnbc.com/2025/08/25/bofa-downgrades-american-eagle-says-tariffs-will-spoil-sydney-sweeney-boost.html
[2] https://www.businessinsider.com/sydney-sweeney-american-eagle-ad-aeo-stock-price-tariffs-bofa-2025-8
[3] https://stocktwits.com/news-articles/markets/equity/american-eagle-slips-4-premarket-as-bofa-downgrade/chssYdJRd1M