AP Photo/Richard Drew
- Levi Strauss & Co. stock surged as much as 9% to a record high on Friday.
- The denim maker announced better-than-expected earnings and a booming sales forecast.
- UBS analysts predict the stock will surge another 25%.
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Levi Strauss & Co. stock surged as much as 9% to a record high on Friday after the denim maker announced better-than-expected earnings and a booming sales forecast. Analysts from UBS also predict the stock will surge another 25% from current levels.
Levi was up 4.62% to $26.17 as of 11:05 a.m. ET, having risen to a session peak of $27.17 earlier in the day, its highest since it listed in March 2019.
The San Francisco-based company on Thursday reported an overall 13% net revenue decline for the first quarter of 2021 ending February 28, largely to the ongoing closures of retail locations in select locations and decreased foot traffic overall as more people stayed at home to curb the spread of the virus. More than 40% of the full store footprint in Europe is closed, with others operating on reduced hours, the company said.
The company, however, raised its sales and profit outlook for the second quarter of 2021 on optimist of an economic recovery. The comany said net revenue could increase 24%-25% in the first half of fiscal 2021 compared with the same period a year ago – a jump from its initial guidance of 18%-20%.
"We are banking the outperformance and our outlook going forward has improved based on the strong demand signals we are seeing in the marketplace," Harmit Singh, company CFO, said in a statement. "This gives me confidence we'll achieve our adjusted EBIT margin objective of 12 percent-plus once revenues have returned to pre-pandemic levels."
The company also raised its quarterly dividend to $0.06 per share from $0.04, payable on May 25 to holders of record on May 7.
Levis reported adjusted earnings per share of $0.34 compared to the $0.25 analysts expected, and a $1.31 billion revenue compared to the $1.25 billion forecast.
On Friday, UBS analyst Jay Sole raised his price target for the company by 17% to $34 from $29. He maintains his buy rating for the denim brand.
"The market doesn't fully appreciate the positive impact on Levi's future earnings from the combined power of reopening, an emerging denim cycle, brand investments, mix shifts, and cost savings," Sole said.
The analyst said he expects Levi's earnings per share to reach $1.60 in 2023 - 43% above Levi's pre-pandemic level and 10% ahead of consensus. He said this type of growth plus regular earnings beats will cause the stock's price-to-earnings ratio to rise to 21x from 19.7x.
Levi in 2019 went public for the second time. The 168-year-old company previously went public in 1971 but its namesake founders, 14 years after, took it private again.