Happy Saturday afternoon to everyone on The Street.

And, welcome back to our new deep dive edition, in which we’ll double-click on a sector, metric, or other investing-related topic we feel isn’t getting the shine it deserves.

Today’s industry has been on the downtrend since we were singing “Since U Been Gone” — but, according to some, it’s not quite gone yet.

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TOGETHER WITH JACK CARTER TRADING

Close the Income Gap: A New Trading Strategy Unveiled!

The average household has just north of $5,000 a month in expenses — and that’s just the bare necessities. 

Meanwhile, the average monthly income in the United States is only $4,340 a month. That’s a huge income gap many folks can’t fill.

That’s exactly why Jack Carter is on a mission to show a small group of people how they could start targeting an extra $500 or more week after week… Step-by-step… Starting right now.

This isn’t some boring, slow-growth dividend strategy. It’s not about bonds, risky naked options, or even gold. It all comes down to placing one of these “2-Step Trades” each and every week. 

Whether you’re starting with $1 million in your retirement account… Or just ten grand… None of that matters.

But you don’t have to make a decision immediately…

Watch me place one live for FREE and decide for yourself!

* The profits and performance shown are not typical, we make no future earnings claims, and you may lose money. From 1/1/21 to 1/23/24 the average return per options trade winners and losers is 3.1% in 3 days, with a 97% win rate. Annualized the return on options is 163% per year.

Mall Brand or Market Darling?

After briefly surpassing Microsoft (MSFT) as the most valuable company in the world this past week, NVIDIA (NVDA) is officially this year’s market darling. 

But another stock has dramatically outperformed the chipmaking giant over the past 12 months — and you’d be forgiven for still thinking it’s only “darling” to ripped male models with a penchant for pungent cologne. 

Shares of Abercrombie & Fitch (ANF) are up a whopping 365% in the past year. And that’s after cooling from its recent peak.

After generating considerable controversy for its suggestive advertisements and limited sizing options, the brand parted ways with CEO Mike Jefferies in 2014 amid an 11-quarter streak of declining sales. In the subsequent decade, it embarked on a remarkable turnaround, reinventing itself as a trendy TikTok fave and impressing investors as its revenue outpaced costs.

But you’d be forgiven if you didn’t get in on the Abercrombie rally a year ago, back when shares were in the low $20s. In recent years, you’re much more likely to see mall brands mentioned as a dying breed than a growth sector. Most analysts do say it’s too late to get in on the Cinderella story now though. The brokerages covering Abercrombie have reached a consensus Hold rating. 

However, the brand’s success does suggest reports of the American mall’s demise may be greatly exaggerated. And it begs the question, if Abercrombie can turn it around, what other mall mainstays are investors overlooking today?

The Eagle Hasn’t Landed Yet

Investors who didn’t grow up listening to pop-punk and “shutting it down at the mall” may think Abercrombie & Fitch and American Eagle Outfitters (AEO) are the same company. (Aeropostale only adds to the confusion.)

But while their target demographics might be similar, the gap in these brands’ share prices is dramatic. In fact, American Eagle’s stock is right about where Abercrombie’s was a year ago. It closed out this week at just about $20.

However, several major analysts don’t think it will stay that way for much longer. Earlier this month, UBS reiterated its Buy rating on American Eagle, with a price target of $35, giving it an upside of roughly 75%.

The firm anticipates improvements in comparable sales later this year, as the namesake brand enhances its product offerings and relies less on Aerie’s swimwear category. It also projects a positive trajectory in EBIT margins, potentially leading to upward revisions in earnings per share (EPS) and expansion of its price-to-earnings (P/E) ratio.

These projections hinge on American Eagle’s new strategic roadmap unveiled earlier this year, aiming to add $700 million in sales over the next three years via a renewed focus on its denim line, activewear growth, and expansion of its Aerie brand.

UBS’s discussions with the brand’s management convinced the firm that AEO’s strategic direction and operational capabilities are on the right track. It noted the stock's current valuation at approximately 12 times forward-year P/E, and projects a robust 16% compound annual growth rate (CAGR) in EPS over the next five years.

UBS isn’t the only firm bullish on AEO. Barclays and JPMorgan both recently assigned an Overweight rating to AEO as well, with price targets of $32 and $31, respectively. But the Eagle is not without its bears. CFRA Research has maintained its Sell rating with a price target of $20. It also set conservative EPS estimates for fiscal years 2025 and 2026, citing valuation concerns.

Closing the Gap

Another early-aughts mainstay might be following in Abercrombie’s footsteps, and even if it’s share price is many paces behind, some would say it’s closing the (ahem) gap.

The Gap (GAP), parent company of Athleta, Banana Republic, and Old Navy, recently reported impressive first-quarter earnings results. Comparable store sales across its four brands were up 3% year-over-year and a solid $1.7 billion cash pile to put to work.

The Gap took a similar approach to reinvention as Abercrombie, starting with a top-down makeover. Within the past year, it brought on CEO Richard Dickson — formerly of Mattel (MAT) and often credited for the revival of the Barbie brand — along with celebrity designer Zac Posen as creative director. Investors were impressed with the progress, as its stock surged after the report.

However, analysts are divided on whether the momentum can continue, and currently have a consensus Hold rating on the Gap ahead of its next quarterly earnings on August 22.

TOGETHER WITH JACK CARTER TRADING

Close the Income Gap: A New Trading Strategy Unveiled!

The average household has just north of $5,000 a month in expenses — and that’s just the bare necessities. 

Meanwhile, the average monthly income in the United States is only $4,340 a month. That’s a huge income gap many folks can’t fill.

That’s exactly why Jack Carter is on a mission to show a small group of people how they could start targeting an extra $500 or more week after week… Step-by-step… Starting right now.

This isn’t some boring, slow-growth dividend strategy. It’s not about bonds, risky naked options, or even gold. It all comes down to placing one of these “2-Step Trades” each and every week. 

Whether you’re starting with $1 million in your retirement account… Or just ten grand… None of that matters.

But you don’t have to make a decision immediately…

Watch me place one live for FREE and decide for yourself!

* The profits and performance shown are not typical, we make no future earnings claims, and you may lose money. From 1/1/21 to 1/23/24 the average return per options trade winners and losers is 3.1% in 3 days, with a 97% win rate. Annualized the return on options is 163% per year.

A Mall-titude of Options

One of Athleta’s chief competitors, Lululemon (LULU), is down more than 17% in the past year. But earlier this month, HSBC upgraded it from Hold to Buy, with a price target of $425, more than 36% higher than its closing price on Friday. The company’s fiscal 2024 guidance remains largely unchanged, despite a recent stock selloff that suggested the market might have anticipated downward revisions.

Finally, TD Cowen raised its price target on Levi Strauss & Co (LEVI) to a Wall Street high of $26 this week. That’s just a 10.5% upside from its current levels, but the analyst’s note struck an optimistic term, highlighting the century-old company’s denim market share, growth in the direct-to-consumer market, and potential to outperform its conservative guidance. The firm then listed it as a Best Small- and Mid-Cap Idea.

It may feel like mall-adjacent investments are more picked through than a Hot Topic clearance rack in 2004 — but, to hear analysts tell it, it might be more abundant than a Hot Topic clearance rack in 2024.