Although fashion trends are constantly changing, jeans — in one form or another — never seem to go out of style. One company in particular offers investors a prime opportunity to profit from this clothing tradition. Levi Strauss & Co., best known for its jeans and other denim clothes, first debuted on the markets with its 2019 initial public offering and is traded under the symbol LEVI. The company has reported strong earnings and growth over the past few quarters and seems set up for future success. But although Levi Strauss is a good investment opportunity, it might take time to pay off.
Levi’s released its third-quarter financial results Oct. 6. The company reported strong numbers and beat its earnings forecast with $0.47 diluted earnings per share, up from $0.07 in 2020 and $0.30 in 2019. This number illustrates how the company is bouncing back from the stresses of the COVID-19 pandemic, and then some.
Financials can show a company’s strengths and weaknesses but cannot provide an investor with all the necessary information to make a decision regarding the stock.
Levi Strauss is a brand trusted by consumers, who know they will receive quality products from the company. That trust has led Levi’s to become a household name, and consumers usually buy what is familiar to them. Because clothing is a product everyone needs, Levi’s continues to have a strong consumer base, even in times of trouble like a pandemic.
Other factors to consider include those that might not show up on reports but could play a role in company growth. During the pandemic, about 35% of Americans reported weight gain, which will likely translate into the need for new clothes. Levi Strauss, as the king of jeans companies, has the opportunity to gain a large portion of this business.
Levi’s is one of the most popular and best-selling denim brands, but the company is expanding into other areas, including athletic wear. The company recently purchased Beyond Yoga, an athletic apparel company. The acquisition should boost future profits as that type of clothing continues to grow in popularity. It also shows Levi’s is adapting its operations to account for changing trends and culture.
The company is also betting on technology to increase profits, which will boost returns for investors. The company is using AI to improve operations by delivering ads and promotions to customers based on their prior purchases. In the third quarter of 2021, Levi Strauss reported a 20% increase in downloads of its app compared to the first quarter.
Technology provides a way for companies to efficiently reach customers and improve sales. Global culture is changing, and online shopping is becoming more popular than in-person. With app downloads increasing, Levi’s can advertise to all people without alienating any, which will positively affect sales.
Although the financials for Levi’s are well-rounded, the charts show a possible upcoming price dip. On the stock’s price chart, a “death cross” has formed. That happens when the 50-day moving average crosses below the 200-day, signaling a possible change to the ongoing trend.
This “death cross” might worry some, but the company’s stock still appears healthy overall. Even if it drops below an investor’s purchase price, there is a dividend that will help offset the temporary loss until the price rebounds from more strong quarterly results.
Levi Strauss stock offers a promising investment opportunity as the company produces a popular product and has strong financials. The stock is a good long-term investment, but its price might drop slightly or become stagnant in the coming months as investors await further results and relief from supply chain- and pandemic-related issues.