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Why Cheap Levi Stock is a 'Strong Buy' Ahead of Q2 Earnings
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Levi Strauss & Co. (LEVI - Free Report) shares have soared 130% since last fall as Wall Street jumped into reopening stocks. The denim powerhouse’s growth outlook is solid as it continues to diversify beyond jeans. Levi could also benefit as people update their looks as they restart their more normal lives.
Let’s check out why LEVI stock might be worth buying ahead of its second quarter fiscal 2021 earnings release on Thursday, July 8.
Denim Comeback?
Levi sells various offerings for men, women, and kids under its namesake brand, Dockers, and others. And the historic denim company is preparing for the future and adapting to thrive in the always-changing world of fashion by diversifying far beyond jeans. CEO Chip Bergh has said he expects half of Levi’s revenue to come from “products that are not denim bottoms” over the next decade, up from 11% in 2015 and 21% in 2020.
Like all retailers, Levi has improved its e-commerce business in order to succeed in the convenience shopping age the pandemic accelerated. Last quarter, its company operated e-commerce sales jumped 25% and its overall global digital sales soared 41% to account for 26% of total revenue, up from 16% in the year-ago period. Levi has also beefed up partnerships with the likes of Target (TGT - Free Report) for clothing and beyond, as traditional department stores fade.
Even though athleisure has dominated wardrobes in recent years, fashion is historically cyclical. And Levi has crushed Lululemon (LULU - Free Report) and Nike (NKE - Free Report) over the last year. On top of that, Levi is poised to benefit from the grand U.S. reopening, which includes everything from concerts and date nights to heading back to the office.
Image Source: Zacks Investment Research
What Else?
Levi struggled following its return to the public markets in 2019, but investors dove into the stock in September for many of the reasons we just touched on.
Levi has surged 130% from around $12 a share to the roughly $27.30 a share it traded at as of late afternoon Friday. Luckily for investors who missed out on this run, Levi has cooled off a bit, matching its industry’s roughly 35% climb in 2021.
Levi sits about 10% below its early May highs at the moment and the stock sits right near neutral RSI levels, which could give it plenty of runway. The stock did recently fail to break above its 50-day moving average. But if it’s able to impress Wall Street with strong guidance it could be ready to go on another run.
The stock also trades not too far above its highly-ranked Retail-Apparel and Shoes space, which is in the top 12% of over 250 Zacks industries right now, at 22.2X forward earnings.
The apparel firm’s second quarter revenue is projected to skyrocket 144% from $497.5 million in the easy-to-compare period last year to $1.21 billion, based on Zacks estimates. Meanwhile, it is expected to swing from an adjusted loss of -$0.48 to +$0.09 a share.
Looking further down the line, Levi’s FY21 sales are set to climb over 24% to $5.54 billion, with another 10% growth expected in FY22 to reach $6.1 billion. These estimates would help Levi jump above its pre-pandemic levels of $5.8 billion.
At the bottom end of the income statement, its adjusted earnings are projected to soar by 430% to $1.11 a share in 2021, with FY22 set to pop another 20% higher. Levi’s consensus earnings estimates have climbed since its last report and it has crushed our adjusted EPS estimates by an average of 70% in the trailing three periods.
Bottom Line
Levi’s bottom-line revisions positivity helps it grab a Zacks Rank #1 (Strong Buy) at the moment, next to a “B” grade for Growth. Plus, Levi management raised its dividend for the second quarter, and three of the four brokerage recommendations Zacks has for Levi are “Strong Buys” with the other at a “Buy,” helping show that Wall Street remains high on the stock.
Playing stocks around earnings always comes with risks. But investors with a bit of a longer horizon might want to take a chance on Levi.
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Image: Bigstock
Why Cheap Levi Stock is a 'Strong Buy' Ahead of Q2 Earnings
Levi Strauss & Co. (LEVI - Free Report) shares have soared 130% since last fall as Wall Street jumped into reopening stocks. The denim powerhouse’s growth outlook is solid as it continues to diversify beyond jeans. Levi could also benefit as people update their looks as they restart their more normal lives.
Let’s check out why LEVI stock might be worth buying ahead of its second quarter fiscal 2021 earnings release on Thursday, July 8.
Denim Comeback?
Levi sells various offerings for men, women, and kids under its namesake brand, Dockers, and others. And the historic denim company is preparing for the future and adapting to thrive in the always-changing world of fashion by diversifying far beyond jeans. CEO Chip Bergh has said he expects half of Levi’s revenue to come from “products that are not denim bottoms” over the next decade, up from 11% in 2015 and 21% in 2020.
Like all retailers, Levi has improved its e-commerce business in order to succeed in the convenience shopping age the pandemic accelerated. Last quarter, its company operated e-commerce sales jumped 25% and its overall global digital sales soared 41% to account for 26% of total revenue, up from 16% in the year-ago period. Levi has also beefed up partnerships with the likes of Target (TGT - Free Report) for clothing and beyond, as traditional department stores fade.
Even though athleisure has dominated wardrobes in recent years, fashion is historically cyclical. And Levi has crushed Lululemon (LULU - Free Report) and Nike (NKE - Free Report) over the last year. On top of that, Levi is poised to benefit from the grand U.S. reopening, which includes everything from concerts and date nights to heading back to the office.
What Else?
Levi struggled following its return to the public markets in 2019, but investors dove into the stock in September for many of the reasons we just touched on.
Levi has surged 130% from around $12 a share to the roughly $27.30 a share it traded at as of late afternoon Friday. Luckily for investors who missed out on this run, Levi has cooled off a bit, matching its industry’s roughly 35% climb in 2021.
Levi sits about 10% below its early May highs at the moment and the stock sits right near neutral RSI levels, which could give it plenty of runway. The stock did recently fail to break above its 50-day moving average. But if it’s able to impress Wall Street with strong guidance it could be ready to go on another run.
The stock also trades not too far above its highly-ranked Retail-Apparel and Shoes space, which is in the top 12% of over 250 Zacks industries right now, at 22.2X forward earnings.
The apparel firm’s second quarter revenue is projected to skyrocket 144% from $497.5 million in the easy-to-compare period last year to $1.21 billion, based on Zacks estimates. Meanwhile, it is expected to swing from an adjusted loss of -$0.48 to +$0.09 a share.
Looking further down the line, Levi’s FY21 sales are set to climb over 24% to $5.54 billion, with another 10% growth expected in FY22 to reach $6.1 billion. These estimates would help Levi jump above its pre-pandemic levels of $5.8 billion.
At the bottom end of the income statement, its adjusted earnings are projected to soar by 430% to $1.11 a share in 2021, with FY22 set to pop another 20% higher. Levi’s consensus earnings estimates have climbed since its last report and it has crushed our adjusted EPS estimates by an average of 70% in the trailing three periods.
Bottom Line
Levi’s bottom-line revisions positivity helps it grab a Zacks Rank #1 (Strong Buy) at the moment, next to a “B” grade for Growth. Plus, Levi management raised its dividend for the second quarter, and three of the four brokerage recommendations Zacks has for Levi are “Strong Buys” with the other at a “Buy,” helping show that Wall Street remains high on the stock.
Playing stocks around earnings always comes with risks. But investors with a bit of a longer horizon might want to take a chance on Levi.
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
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