Price Forecast:

Bullish Case: AEO's strong digital sales momentum and effective margin management could drive significant revenue growth, benefiting from upcoming seasonal purchases and projected holiday traffic increases. This may push AEO shares higher through Q1 2025.

Bearish Case: Economic headwinds and increased competition within the retail sector could hinder AEO's sales growth, leading to potential margin compression. Continued macroeconomic pressures may further suppress discretionary spending, adversely impacting AEO's bottom line.

Potential Outcomes:

• Continued strong digital sales growth: 55% chance
• Increased margin pressure from competition: 30% chance
• Negative macroeconomic impact reducing spending: 40% chance

Trading Oracle: Focus on a bullish debit spread with January 2025 AEO $17.00/$18.00 calls. The strategy leverages the current implied volatility of 38.9%, allowing for a protected position amidst uncertain macroeconomic conditions. Target a 1-month horizon to capitalize on short-term price appreciation.

December 18, 2024