On Tuesday, Stifel analysts adjusted their outlook on Levi Strauss & Co. (NYSE:LEVI) shares, reducing the price target from $25.00 to $20.00 while maintaining a Buy rating. The revision follows a report in which Levi Strauss' organic revenue growth accelerated to 8.6% year-over-year, compared to 8.2% in the previous quarter. The company also reported an adjusted earnings per share (EPS) of $0.38, surpassing Stifel's estimate of $0.27, credited to effective execution of its brand-building strategy.
Despite these positive indicators, concerns loom over potential tariff impacts that have not been factored into the company's reaffirmed guidance. Levi Strauss benefits from a globally diversified revenue stream and a supply chain that sources from 20 different countries, which may provide some structural advantages in mitigating the effects of tariffs compared to its peers. The company maintains impressive gross profit margins of 60% and has demonstrated consistent dividend growth for six consecutive years. Nonetheless, the company is not fully protected from cost increases or a broader consumer spending slowdown.
Stifel's analysis suggests that tariffs could result in a high-single-digit percentage decrease in calendar year 2026 estimated earnings power if consumer demand remains stable. However, if consumer demand falls by a mid-single-digit percentage, the impact on 2026 earnings could be in the mid-teens percentage range.
In light of these potential risks, Stifel's price target of $20.00 is based on 17.4 times the price-to-earnings (P/E) ratio on a projected inflationary scenario EPS of $1.15, and 27.6 times on a projected recessionary scenario EPS of $0.72. The new price target reflects a cautious but still optimistic valuation of Levi Strauss shares, considering possible downside scenarios. InvestingPro analysis suggests the stock is currently undervalued, with additional metrics and 12 more exclusive ProTips available to subscribers. For comprehensive insights, access the detailed Pro Research Report, part of InvestingPro's coverage of over 1,400 US stocks.
In other recent news, Levi Strauss & Co. reported a strong first quarter for fiscal year 2025, with earnings per share (EPS) of $0.38, exceeding expectations of $0.28. The company's revenue was slightly below projections at $1.53 billion, but still marked a 9% year-over-year increase. Levi's direct-to-consumer sales grew by 12%, contributing to a record gross margin of 62.1%. JPMorgan upgraded Levi's stock rating from Neutral to Overweight, while Stifel maintained a Buy rating but reduced the price target to $20.00 from $25.00. JPMorgan highlighted Levi's potential for a multi-year total return profile and noted the company's strong appeal to younger consumers. Stifel pointed out the company's diverse global supply chain as a structural advantage in mitigating tariff impacts. Levi's leadership emphasized their focus on brand strength and strategic growth initiatives amid a dynamic macroeconomic environment.
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