Levi Strauss (NYSE:LEVI) shares rose more than 2% on Wednesday after Jefferies initiated coverage on the denim group with a Buy recommendation, citing improving market share prospects and a business mix that supports steady revenue and earnings growth.
Jefferies said Levi is well positioned to deliver long-term annual revenue growth of around 4% to 5% or better, alongside operating margins trending toward 15%. That combination, the brokerage argued, justifies a mid-teens earnings multiple, above the company’s historical average. Analysts added that sector conditions remain favorable, with the current denim cycle—dating back to around 2021—still having momentum.
The firm pointed to ongoing fashion trends such as looser silhouettes, a stronger focus on comfort, and continued casualisation, noting that previous denim upcycles have typically lasted several years. Levi’s broader product offering should also help soften any future rotation toward dressier apparel or athleisure, according to Jefferies.
At the company level, Jefferies highlighted Levi’s execution on its transformation strategy as a key driver of potential upside in both earnings and valuation over the medium term. Central to that strategy is the shift toward direct-to-consumer channels, which now account for roughly half of total sales and provide greater control over pricing, inventory management and product development.
The brokerage also underscored growth opportunities in tops and women’s apparel, which together make up a significant portion of sales and are helping reduce reliance on core denim. Premiumisation remains another lever, which Jefferies expects will continue to support higher average selling prices.
From a financial perspective, Jefferies sees balanced improvement across the income statement, with revenue growth supported by direct-to-consumer expansion, stable wholesale performance, improving gross margins and operating leverage in selling and administrative costs. Volume-led growth remains important, with further pricing gains offering potential upside. The firm also expects additional share buybacks after the first half of 2026.
Jefferies forecasts earnings of $1.50 per share for 2026, slightly ahead of consensus. It anticipates Levi will strike a cautious tone in its initial 2026 guidance, with more pronounced margin expansion emerging in 2027 as tariff pressures ease and pricing actions take effect.
The brokerage set a price target of $25, reflecting a premium to Levi’s long-term average valuation and its view that the company’s business model is becoming stronger and more resilient.