Levi Strauss & Co. (NYSE: LEVI) has enjoyed a strong run in 2024, with its share price appreciating over 22.6% year-to-date and over 32% in the past 52 weeks. The company recently reported better-than-expected earnings and revenue for the fiscal first quarter, leading to a 16% jump in its share price. Analysts have responded positively, revising their full-year EPS estimates upwards to $1.27, representing a 15.5% year-over-year increase. Revenue growth is also forecast, with analysts predicting a 2.9% rise in 2024 and 5% in 2025. Levi Strauss & Co. maintains a healthy dividend yield of 2.34%, further adding to its appeal for income-oriented investors.
However, some clouds are gathering on the horizon. Despite the recent earnings beat, LEVI’s share price has fallen over 2.4% this week, snapping a seven-week winning streak. This decline coincides with a period of weaker performance in international markets, which account for a significant portion of the company’s revenue. Investors are also watching the impact of inflation on consumer spending, with a potential slowdown raising concerns about Levi Strauss & Co.’s future sales growth.
Technical Analysis
Despite the recent pullback, LEVI’s technicals remain somewhat bullish. The share price is currently trading comfortably above the key moving averages [50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line)], indicating a long-term uptrend. The RSI (58.71) is positioned above 50, suggesting that the bulls are still in control.
However, a few cautionary signs are present. The recent price decline has brought LEVI closer to the 23.60% Fibonacci retracement level of its previous upswing. With the RSI (58.71) trading comfortably above the 50.00 level and the price action trading around the 23.60% Fibonacci retracement level, a bounce higher could push the price towards the last swing high of $22.39. A break above the level would bring the $24.30 resistance level into play in the short term.
However, a sustained push below the 23.60% Fibonacci retracement level could find significant support at the 38.20% Fibonacci retracement level ($18.58). A sustained break below the initial support on significant volume would leave the 50.00% Fibonacci retracement level ($17.41) and 61.80% Fibonacci retracement level ($16.23) firmly within the bears’ reach in the coming sessions.
Summary
Levi Strauss & Co. has posted strong fundamentals and boasts an attractive valuation. The technical outlook is cautiously optimistic, with the bulls still in control in the long term. However, the recent price weakness and potential profit-taking cannot be ignored. Investors should closely monitor price action around the 23.60% Fibonacci retracement level ($20.23). A sustained break above this level could see a continuation of the uptrend, while a break below could lead to a test of the $18.58 support zone.
Sources: TradingView, Trading Economics, Reuters, Zack’s, MT Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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