American Eagle Isn’t a Meme Stock. There’s a Good Reason the Market Is Excited About Sydney Sweeney.

Sydney Sweeney stars in American Eagle’s latest campaign. (Courtesy of American Eagle)

American Eagle Outfitters’ new partnership with actress Sydney Sweeney sent the retailer’s shares soaring Thursday, sparking questions over whether the denim-maker is joining the ranks of the newest meme stocks.

As part of its “Sydney Sweeney Has Great Jeans” campaign, American Eagle will release new denim styles and tout its position as a top jean brand for Gen Z consumers ahead of the back-to-school shopping season, the company said.

The company unveiled the first shots of their campaign starring Sweeney, who starred in HBO’s Euphoria and The White Lotus, Wednesday afternoon, clad in head-to-toe denim.

“Sweeney’s girl next door charm and main character energy—paired with her ability to not take herself too seriously—is the hallmark of this bold, playful campaign,” American Eagle wrote in a press release.

American Eagle will run advertisements on 3-D billboards and the Exosphere of Sphere in Las Vegas, create a Snapchat lens, and use artificial-intelligence try-on technology as part of the campaign, it said.

Aside from the traditional billboard rollout, American Eagle will also release a limited-edition denim jacket and jeans inspired by Sweeney, in addition to over 800 new fall styles, American Eagle said.

The stock was rising 8.4% in early morning trading Thursday after jumping as much as 19% in the premarket session. The surge in share price raised concerns over whether American Eagle got swept up in the recent resurgence of meme stock trading. Stocktwits, an investing-focused social platform, wrote that retail investor chatter about American Eagle’s stock picked up sharply after the announcement. Investor sentiment on Stocktwits’ platform was “extremely bullish” on Thursday, despite being “neutral” a week ago.

It may be too early to add American Eagle to the meme stock list. Although the retailer has been struggling lately, seeing sales slump and profitability take a hit, analysts believe this year will be the most challenging, and are projecting a gradual improvement in both sales and earnings over the following two years, based on FactSet consensus estimates.

Sweeney’s endorsement could help.

It isn’t uncommon for brands to get a boost from celebrity endorsements. Last year, Levi’s partnered with pop star Beyoncé, capitalizing from the buzz the singer gave the brand after naming a song from her latest album, Cowboy Carter, “Levii’s Jeans.” As of the company’s first quarter, the campaign drove 4.3 billion press impressions, or more than $65 million in media value, said Levi’s CEO Michelle Gass in the company’s April earnings call.

“It’s creating a nice tailwind to everything else that we’re doing,” Gass added.

Sweeney herself has already proven to be an effective brand ambassador. Crocs stock got a bump last August after the company tapped Sweeney to be the face of its HeyDude footwear brand. And her collaboration with men’s grooming brand Dr. Squatch—advertising its new line of body washes—was so successful it prompted Dr. Squatch to run a follow-up marketing campaign selling soap made with Sweeney’s bath water. The limited-edition bathwater soap, launched in May, sold out within minutes.

In June, Unilever announced it had agreed to buy Dr. Squatch, praising the company’s partnership with influencers and celebrities for helping drive sales and grow a loyal customer base. Unilever did not disclose how much it paid for the company.

Write to Nate Wolf at nate.wolf@barrons.com and Sabrina Escobar at sabrina.escobar@barrons.com