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On Wednesday, TD Cowen maintained a positive outlook on Levi Strauss & Co. (NYSE:LEVI), reiterating a Buy rating alongside a $26.00 price target for the company's stock. The firm's stance is buoyed by the company's globally diversified growth and direct-to-consumer (DTC) initiatives, which are seen as beneficial amidst the current market valuation.
The analyst from TD Cowen highlighted several factors contributing to the favorable assessment of Levi Strauss. An expected acceleration in the second half of the year is anticipated, driven by new lifestyle products, clear visibility of the wholesale order book, and continued momentum in the company's DTC channel.
A long-term margin expansion to 15% was identified as an attainable goal for Levi Strauss. The analyst noted that this could be achieved through increased productivity, cost savings, and leveraging fixed costs. These strategic financial maneuvers are poised to bolster the company's profitability over time.
Furthermore, the company's guidance already accounts for anticipated declines in the wholesale sector during the second half of the year. This proactive inclusion in their financial forecasting demonstrates Levi Strauss's strategic planning and transparency with investors.
Levi Strauss's current valuation stands at 13 times price-to-earnings (P/E) on the back of recent market pullbacks, which TD Cowen views as reasonable. This valuation reflects the market's assessment of the company's earnings relative to its share price, a key metric for investors when evaluating potential investments.
In other recent news, Levi Strauss & Co. experienced a shortfall in its Q2 revenue, largely attributed to a decrease in its U.S. wholesale business. Despite a 12% increase in its direct-to-consumer (DTC) segment, the company failed to reach its revenue targets. This was further compounded by the underperformance of the Dockers brand. UBS, however, reiterated a Buy rating on Levi Strauss shares, anticipating solid earnings per share (EPS) growth. The firm believes Levi Strauss can capitalize on its reputable brand and investments in the DTC channel.
Citi Research maintained a neutral stance on Levi Strauss shares, citing mixed financial results. While Levi Strauss's earnings exceeded predictions due to gross margin improvements, sales slightly missed market forecasts. Stifel has increased its price target for Levi Strauss from $24 to $28, maintaining a Buy rating. The firm anticipates potential for Levi Strauss to surpass its Q2 2024 revenue and EPS projections.
TD Cowen also raised its price target for Levi Strauss to $26 from $23, maintaining a Buy rating. The firm highlighted Levi's successful premiumization strategy and plans to increase its store count from approximately 1,100 to 1,500 by 2027. These recent developments provide investors with an insight into the company's current trajectory.
InvestingPro Insights
Turning to real-time metrics from InvestingPro, Levi Strauss & Co. (NYSE:LEVI) presents a mixed financial picture. With a market capitalization of $7.31 billion, the company's P/E ratio stands at an elevated 51.02, which suggests a high valuation relative to earnings. However, when adjusted for the last twelve months as of Q2 2024, the P/E ratio normalizes to a more modest 17.41. Additionally, the company's revenue saw a slight increase of 0.33% over the same period, indicating steady, albeit slow, top-line growth.
InvestingPro Tips reveal that Levi Strauss has a history of raising its dividend, having done so for 5 consecutive years, which may appeal to income-focused investors. Furthermore, the stock is currently in oversold territory according to the Relative Strength Index (RSI), potentially indicating an entry point for bargain hunters. It's worth noting that while analysts have revised their earnings expectations downwards for the upcoming period, they remain optimistic about the company's profitability this year. For those interested in deeper analysis, there are additional tips available on InvestingPro, which can be accessed with a special offer using coupon code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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