Levi Strauss & Co Pre-earnings Analysis
Chart done on daily timeframe. Shares of Levi Strauss are pulling back from their 52 week highs as investors await the company’s first quarterly earnings. Trading volume saw levels not seen since their last earnings report, and based on the movement on 4/2, the majority of that volume was likely profit taking ahead of the report. Analysts are expecting LEVI to report a EPS of .20, a target significantly lower than their last results of .44. LEVI should be able to hit that target, especially considering this quarter includes December’s Christmas revenue. However an earnings beat alone won’t be enough to move the stock higher, and that’s because the earnings target is already so low. LEVI will need to report a number closer to their last quarter’s performance to really impress buyers, otherwise the stock is likely to stay flat or decline.
LEVI’s price to earnings ratio is currently around 30, significantly higher than the average Apparel Manufacturing Industry of 17. This makes LEVI especially expensive and at risk of correction. With the stock already trading near its 52 week highs, if they miss or even come right in line, it will likely trigger a decline for the quarter.
Option chain analysis:
The option chain that expires on April 19th currently reflect an implied volatility reading of about 70%, which translates to about a $2.20 in the underlying stock. However considering LEVI is a slow moving stock, the May 17th options may be a better choice for an earnings play. The May option chain shows a 52% IV reading, about a $2.80 move. So if LEVI doesn’t impress, it will likely fall towards its 16.00 support. If it does beat and impress buyers then it will see 21.00-22.00.