Sydney Sweeney bump: Wall Street grows bullish on American Eagle (AEO)

The old adage that "there's no such thing as bad publicity" has certainly been true for American Eagle (AEO).

Back in July, when the clothing retailer launched its now-infamous ad campaign with the actress Sydney Sweeney, it created a firestorm on social media.

Then it got heavily covered by traditional media outlets, turning what had initially seemed like a standard marketing push into something much bigger.

The controversy stemmed from the ad's tagline, "Sydney Sweeney Has Great Jeans," which was an obvious play on the words genes and jeans.

While many took it to be an innocuous reference to Sweeney being a beautiful woman, many others interpreted it as a coded reference to eugenics, a discredited scientific theory about racial purity that has often been promoted by white supremacists.

One user on X wrote that “getting a blue eyed, blonde, white women and focusing your campaign around her having perfect genetics feels weird, especially considering the current state of America."

And then after it was revealed that Sweeney is a registered Republican in Florida, President Trump came to her defense, turning what had already been a controversial ad campaign into one that became politically divisive.

But for American Eagle, the culture wars have proven to be very good publicity for its brand. And it has given the company a boost at a time when it could probably use it the most.

A record Q3 with further growth projected

Many American retailers are struggling with the ramifications of Trump's tariffs, even leading Costco to sue the administration this week. Consumer confidence has also plunged just as holiday shopping season began, with both unemployment and inflation trending upwards.

However, American Eagle reported on Tuesday a 6% increase in revenue to $1.4 billion, a third-quarter record for the retailer. It beat Wall Street's expectations of $1.3 billion.

Its net income also rose nearly 7% to $91.3 million, while reporting a lower net impact from tariffs than it had forecasted three months ago.

The company also raised its fiscal fourth-quarter operating-income guidance to between $155 million to $160 million, with projected growth for same-store sales in a range of 8% to 9%.

“Strong momentum has continued into the fourth quarter, including an excellent start to the holiday season," American Eagle CEO Jay Shottenstein said in a statement.

"We delivered a record-breaking Thanksgiving weekend, led by an acceleration in demand across brands and channels and underscored by outstanding growth at Aerie and Offline.”

Aerie is the company's lingerie brand, while Offline is its activewear.

As the company's sales continue to soar, Wall Street has taken notice. Seven of the analysts who cover the AEO stock have raised their price targets, while JPMorgan has also upgraded its rating to Neutral from Underweight.

Among the biggest hikes was UBS raising its price target nearly 40% to $31 from $22 and Telsey Advisory raising its price target 32.6% to $25 from $18.

The company's stock gained 15.1% on Wednesday and has surged nearly 43.8% for the year.

American Eagle just recently launched what will likely be a much less controversial holiday ad campaign featuring 84-year-old Martha Stewart.