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Bank of America lowered its rating on Levi Strauss & Co. (NYSE:LEVI) to Neutral from Buy on Wednesday on its view that while that the apparel company is well positioned to benefit from structural margin improvements over the longer term, near term challenges such as a slowdown in denim demand keep the risk/reward balanced. Other risks seen for the stock include challenges with the denim market, U.S. wholesale business and uncertainty in Europe around the energy crisis.
Analyst Christopher Nardone and team foresee 20% downside to first half estimates on LEVI and remain uncertain that denim demand will improve in the near term.
“While we continue to view LEVI as a best-in-class retailer with opportunity for sustainable sales growth over the medium term (combination of store growth and share gains), we think the stock is fairly valued at 8x EV/EBITDA and 14x P/E .”
The firm assigned a price objective of $17, which works out to 8.5X the EV/EBITDA mark.
Shares of LEVI fell 2.55% premarket to $15.87.
Earlier in the month, both Goldman Sachs and Citi moved to Hold-equivalent ratings. The Seeking Alpha Quant Rating on LEVI is also flashing Hold.
Image and article originally from seekingalpha.com. Read the original article here.