Monday - Stifel has updated its price target for Levi Strauss & Co. (NYSE:LEVI), increasing it from $24 to $28, while maintaining a Buy rating on the shares. The firm anticipates potential for Levi Strauss to surpass its second quarter 2024 revenue and earnings per share (EPS) projections, as well as a possible positive revision to its full year 2024 guidance.
The analyst at Stifel highlighted several factors contributing to this optimistic outlook. Key among them is the sustained relevance of the denim category, driven by current style trends such as western, wide-leg, and low-rise designs, which are expected to encourage consumer purchases. Additionally, improved merchandising in Levi's direct-to-consumer (DTC) segment is believed to strengthen the company's fundamentals heading into the second half of the financial year, which is crucial for sales.
Further supporting the positive assessment is Project Fuel, Levi Strauss's initiative focused on improving the quality of sales and capital efficiency. This strategy is seen as a catalyst for enhanced profitability growth that is expected to accompany revenue increases.
The firm's confidence is bolstered by Levi Strauss's performance in the first half of the year and the noticeable momentum in the DTC channel. With these factors in mind, Stifel has expressed a higher conviction in the stock's prospects, particularly looking forward to the earnings potential that could reach approximately $2 per share by the 2026 fiscal year.
The new price target of $28 is based on 12.7 times Stifel's adjusted EBITDA estimate of $921 million for the fiscal year 2025, marking an increase from the previous valuation of 11 times EV/EBITDA. This adjustment reflects a more optimistic view of Levi Strauss's future financial performance.
In other recent news, Levi Strauss & Co. has been the subject of several significant developments. TD Cowen has raised the denim company's share price target from $23.00 to $26.00, maintaining a Buy rating and highlighting it as a top pick among small to mid-cap companies. This positive outlook is attributed to Levi's successful premiumization strategy and plans to increase its store count from approximately 1,100 to 1,500 by 2027.
In addition, Levi Strauss has appointed Gianluca Flore as its new executive vice president and chief commercial officer, aiming to expand its direct-to-consumer sales and international presence. The company has also announced significant workforce reductions, a trend observed across North American firms.
The company's financial performance has started strong for fiscal year 2024, with Stifel increasing its share price target for Levi Strauss to $24, maintaining a "Buy" rating. This follows Levi's reported revenue of $1,558 million and an adjusted earnings per share of $0.26, exceeding Stifel's projections.
InvestingPro Insights
As Levi Strauss & Co. (NYSE:LEVI) garners a favorable outlook from Stifel with a raised price target and a maintained Buy rating, it's essential to consider key financial metrics and market performance data. According to InvestingPro, Levi's market capitalization stands at a robust $9.16 billion. While the company is trading at a high earnings multiple with a P/E ratio of 24.63 for the last twelve months as of Q1 2024, this could reflect market expectations for future earnings growth, in line with Stifel's projections. Additionally, Levi's price to book ratio is 4.63, which may indicate a premium market valuation relative to the company's book value.
InvestingPro Tips reveal that Levi Strauss has demonstrated a strong return over the last year, with a 64.44% price total return, and a significant 41.85% increase over the past six months, suggesting robust investor confidence. These returns could be a testament to the company's strategic initiatives such as Project Fuel, aimed at enhancing profitability and sales quality. Furthermore, Levi's liquid assets exceed short-term obligations, providing financial flexibility and stability. For investors looking for more in-depth analysis, there are additional tips available on InvestingPro, including insights on the company's dividend growth and debt levels. To access these valuable tips and more, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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