Tuesday, Levi Strauss & Co. (NYSE:LEVI) experienced an uptick in its stock price target, now set at $18.00, up from the previous $17.00, while JPMorgan maintained an Overweight rating on the shares. The adjustment follows a series of discussions with Levi’s executive team, including CEO Michelle Gass and CFO Harmit Singh, during an investor roadshow.
During the roadshow, CEO Gass emphasized the strength of the Levi’s brand, highlighting growth in men’s, women’s, and lifestyle segments. The company’s "DTC First" strategy aims for balanced expansion across different sales channels. CFO Singh pointed to a long-term operating margin target of 15%, an increase from the trailing twelve months’ 11.5%. This target appears achievable given the company’s impressive gross profit margin of 60.82% and strong pricing power. InvestingPro data reveals 8 additional key metrics and insights about LEVI’s profitability potential.
JPMorgan’s analysis suggests that by FY25, Levi’s could achieve earnings per share (EPS) of approximately $1.50, which is 20% above both the current estimate and the management’s guidance range of $1.20-1.25. This projection is based on the expectation of high-single-digit revenue growth and significant gross margin expansion, outpacing the company’s current outlook. According to InvestingPro, Levi’s maintains a healthy financial position with sufficient cash flows to cover interest payments and operates with a moderate debt level. Despite the uncertain economic environment, the management has not observed any intrinsic changes in the business, including no wholesale partner cancellations or signs of softening demand in direct-to-consumer sales in the US and Europe.
The company’s diversified sourcing strategy has been noted as a protective measure against tariffs, with China now representing a mere 1% of sourcing compared to much higher figures in 2018. This positions Levi’s favorably in terms of tariff impact relative to the broader industry. Additionally, management has indicated that Levi’s pricing power has been bolstered by strategic exits from lower-margin segments, direct-to-consumer expansion, and SKU rationalization.
JPMorgan’s revised price target of $18 is based on 7.6 times the firm’s FY26 EBITDA projection, which is below the pre-pandemic average of 9.3 times. The firm also outlined a scenario where Levi’s equity value could reach $25, assuming full tariff mitigation similar to the strategies employed in 2018/2019, or $23 with 75% mitigation. The new price target reflects confidence in Levi’s brand momentum and strategic initiatives aimed at driving profitability and growth.
In other recent news, Levi Strauss & Co. reported a strong first quarter for fiscal year 2025, with earnings per share (EPS) significantly surpassing expectations at $0.38, compared to the forecasted $0.28. The company’s revenue reached $1.53 billion, slightly below projections but still reflecting a 9% year-over-year increase. UBS analyst Jay Sole reaffirmed a Buy rating with a $20 price target, citing Levi Strauss’s robust global supply chain and effective management strategies as key strengths. Meanwhile, Stifel analysts adjusted their price target from $25 to $20, maintaining a Buy rating, and highlighted the company’s 8.6% organic revenue growth. JPMorgan analyst Matthew Boss upgraded Levi Strauss from Neutral to Overweight, despite lowering the price target to $17, noting the company’s appeal to younger consumers and improved profitability. Levi Strauss continues to demonstrate resilience against tariff concerns, benefiting from a diversified supply chain and strategic global revenue distribution. These developments underscore the company’s ongoing transformation into a global, multi-channel lifestyle brand.
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