Levi Strauss

Levi Strauss Could Hit New All-Time High on Strong Q2 Earnings; Target Price $31.5

Levi Strauss & Co, an American clothing company known for its Levi’s brand of denim jeans, is expected to report its fiscal second-quarter earnings of $0.09 per share, which represents year-over-year growth of around 120% from a loss -$0.45 per share seen in the same quarter a year ago.

The San Francisco-based jeans maker would post revenue growth of about 140% to $1.21 billion. In the last four consecutive quarters, on average, the company has delivered earnings surprise in all four times.

Levi Strauss’ better-than-expected results, which will be announced on Thursday, July 8, would help the stock hit new all-time highs. Levi Strauss shares surged more than 35% so far this year. The stock ended nearly flat at $27.46 on Friday.

Despite the recent stock price rally, Levi Strauss continues to trade at a discount to peers, thus we see an opportunity for the stock to re-rate further, particularly if the above-planned revenue recovery continues into 2H21, noted Kimberly Greenberger, an equity analyst at Morgan Stanley.

Levi Strauss Stock Price Forecast

Six analysts who offered stock ratings for Levi Strauss in the last three months forecast the average price in 12 months of $31.50 with a high forecast of $36.00 and a low forecast of $28.00.

The average price target represents 14.71% from the last price of $27.46. All of those six analysts rated “Buy”, while none rated “Hold” or “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $28 with a high of $36 under a bull scenario and $16 under the worst-case scenario. The firm gave an “Overweight” rating on the jeans maker’s stock.

Several other analysts have also updated their stock outlook. Evercore ISI raised the target price to $36 from $30. Levi Strauss had its price target upped by JPMorgan to $34 from $29. JPMorgan Chase & Co. currently has an overweight rating on the blue-jean maker’s stock. UBS Group increased their price target to $34 from $29 and gave the company a buy rating.

Analyst Comments

LEVI’s Mar-May quarter (2Q) likely benefits from the favorable macro backdrop that boosted Softlines’ 1Q (Feb-Apr) results. LEVI’s impressive +36% YTD rally suggests a beat is expected. Stock likely trades on forward guidance, which we anticipate comes in above Street estimates,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

LEVI’s +24-25% y/y 1H21 revenue guidance appears conservative, particularly in light of management’s encouraging 2QTD commentary on the last earnings call and the outsized beats reported by peers with Feb-Apr quarters. The ‘Denim Resurgence’ trend may also contribute to a potential 2Q21 revenue beat. We think gross margin meets (and likely beats) consensus expectations, driven by clean inventories, a mix-shift towards digital sales, and greater international revenue growth as Europe sales gradually recover. We forecast 8c EPS, in-line with consensus and at the high-end of management’s 7-8c adj. EPS guidance.”

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