Levi Strauss Positioned For Quick Recovery, BofA Says In Upgrade

Levi Strauss & Co. LEVI seems well-positioned to recover faster than peers and to drive healthy sales growth, according to BofA Securities.

The Levi Strauss Analyst: Heather Balsky upgraded Levi Strauss from Neutral to Buy and raised the price target from $18 to $20.

The Levi Strauss Thesis: The stock does not reflect the company’s recovery potential, given its “underlying brand strength, new distribution opportunities and an accelerated shift to casual apparel,” Balsky said in the Tuesday upgrade note.

“We also expect it to exit the pandemic with stronger margins due to pricing and cost initiatives,” the analyst said.

“A focus on elevating assortments and distribution, recent price increases (taken pre-COVID) and ongoing mix shift to international are gross and EBIT margin accretive.”

Balsky reduced the earnings estimate for fiscal 2020 from 16 cents per share to 2 cents per share to reflect Europe’s COVID-19-related shutdowns, given that the region accounted for 31% of the previous fiscal year’s total sales.

At the same time, she raised the earnings estimate for fiscal 2021 from $1.04 per share to $1.08 to reflect the expected recovery.

LEVI Price Action: Shares of Levi Strauss were up 5.15% at $17.35 at the time of publication Tuesday.