Levi Strauss & Co. (NYSE: LEVI) is an iconic American clothing brands, maybe even one of the most iconic of them all. It’s also a company that investors don’t want to give a higher earnings multiple to. Its stock was down about 10% after earnings and Wall Street analysts are still sticking to higher price targets. So, what are strategic investors supposed to think now?
The problem for strategic investors is that 6 analysts had raised their price targets in the weeks before this earnings report and Levi Strauss posted a “beat and raise” quarter. The drop is in part due to tariffs as the company guided margin down by 1 point for the current quarter. And there is one less sales week this quarter as well.
One additional issue to consider is that Levi Strauss shares maybe had bounced too far too fast. This was a $17 stock at the start of June but was at $24.54 the day ahead of earnings. It’s also a stock that investors just seem to sell off after earnings. Shares were down by 10% at $22.08 after 30 minutes of trading and the 3+ million shares already traded was already just above an average trading day’s volume.
Management commentary pointed to a “conservative approach to the [fourth] quarter” with “tariffs and maybe potential impacts on demand” along with “the macro environment remains complex…” Levi Strauss’s commentary also pointed to delivering “sustained and profitable growth into 2026 and beyond” and that it’s well-positioned for the holiday season.
Two analysts have raised targets after the earnings report and other reports just haven’t all come in yet, and other calls are coming as well:
- JPMorgan reiterated its Outperform rating and raised its price target to $33 from $23 after earnings.
- Morgan Stanley maintained a less aggressive Equal-Weight rating, but it still raised its target to $20 from $19 after earnings.
- BofA Securities reiterated its Buy rating and kept its $27 price objective in place after earnings.
- Telsey Advisory reiterated its Outperform rating and $27 target after earnings.
Here is how analysts had raised targets or set higher targets in the weeks ahead of this earnings report, listed in chronological order:
- Telsey Advisory Group (reiterated Outperform) target raised to $27 from $24 on 10/03
- Stifel (reiterated Buy) target raised to $27 from $24 on 10/02
- BofA Securities (reiterated Buy) target raised to $27 from $26 on 10/01
- Citigroup (reiterated Neutral) target raised to $23 from $22 on 09/29
- Barclays (reiterated Overweight) target raised to $26 from $24 on 09/26
- Needham (started as Buy) target set at $28 on 09/25
With shares down 10% at $22.02 after earnings, Levi Strauss is now valued at 17.5 times current the consensus year earnings estimate and 15-times next year’s consensus earnings estimates. Its 52-week trading range is $12.17 to $24.82.
The post-earnings drop now generates a 2.5% dividend yield for investors looking at new positions.
At what point will investors learn to factor in tariff impacts and the effects of a shorter quarter due to the calendar changes each year? These should not really be new news at this point, even if they remain as negatives rather than positives for investors.
Strategic investors may look at this latest move as profit-taking. Others may consider the reaction to be more of a cautious stance with ongoing macro concerns. And other investors may think of an iconic American apparel brand valued at a blended 16-times forward earnings.
Please be advised that all analyst ratings and price targets above are from each of the firms specifically named. Oggonomics does not maintain any rating or price target of its own regarding Levi Strauss shares.
