Levi Strauss (LEVI) stock rallied on April 8 after the iconic denim maker reported a strong Q1 and raised its profit and revenue guidance for the full fiscal 2026.
The post-earnings pop pushed LEVI’s relative strength index (14-day) into the early 70s, signaling overbought conditions that often precede a pullback.
However, the earnings release offered ample positives for long-term investors to chase the rally in Levi’s shares that are still down about 5% versus their year-to-date high.
Strong Pricing Power Warrants Buying Levi’s Stock
Levi’s quarterly print proves its brand equity remains strong enough to pass on costs to consumers without sacrificing top-line growth.
In Q1, the apparel giant faced at least 10% tariffs on all imports, but managed to offset the associated costs through strategic price increases and holding back on promotions.
“Demand hasn't been affected by higher pricing, and we see benefits becoming more fully realized starting in F2Q,” wrote Rick Patel, a senior Raymond James analyst, in a post-earnings research report on Wednesday.
This show of robust pricing power warrants buying LEVI shares in the current environment, especially since it pays a healthy dividend yield of 2.58% as well.
DTC Strength Makes LEVI Shares Attractive
Levi’s stock remains worth owning on the continued dominance of the company’s direct-to-consumer (DTC) channel as well.
A 21% increase in e-commerce helped DTC account for more than half of LEVI’s total net revenue in Q1. This shift is structurally bullish as it allows for higher margins and better data collection on consumer habits.
Meanwhile, a successful divestiture of Dockers and continued buybacks ($200 million worth in the first quarter) signal an aggressive focus on boosting shareholder value.
What’s also worth mentioning is that despite strong earnings, LEVI is going for about 1.2x sales currently, which represents a discount to its historical multiple.
Levi’s Remains Buy-Rated Among Wall Street Firms
Wall Street analysts continue to see LEVI stock as significantly “undervalued” at current levels.
According to Barchart, the consensus rating on Levi’s is currently a “Strong Buy,” with the mean price target of $26.50 indicating potential upside of another 23% from here.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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