12:02 PM EST, 03/08/2024 (MT Newswires) -- American Eagle Outfitters ( AEO ) could revise its near-term and out-year earnings outlook as its current guidance appears to be "optimistic" and "tough to deliver," Morgan Stanley said in a Friday note.

The apparel retailer projected revenue growth in the mid-single digits for fiscal Q1 and 2% to 4% for the full fiscal year. In addition, American Eagle Outfitters ( AEO ) announced a three-year growth plan that includes 3% to 5% in revenue growth.

Morgan Stanley said the Q1 and full-year topline forecasts seem "achievable," but the profitability guidance is "more optimistic" given that its 2023 gross margin is already at a decade-high. The investment firm expects American Eagle Outfitters' ( AEO ) 2024 sales to reach the high end of its guidance but gross margin to be flat.

The investment firm said the negative earnings revision risk, recent stock rally, and limited upside drive its underweight rating on American Eagle Outfitters ( AEO ). Morgan Stanley, however, raised its price target on the company's stock to $19 from $16.

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