- Levi Strauss shares moved higher during Thursday's session after Goldman Sachs upgraded the stock from Sell to Buy with a $23 price target.
- Analyst Alexandra Walvis sees a rebound in apparel next year and believes that Levi is well positioned given its e-commerce business and wholesale partnerships.
- The stock moved into overbought territory following the move higher, which means that investors should watch for some consolidation ahead.
Goldman Sachs analyst Alexandra Walvis believes that the apparel category will rebound next year following significant declines this year. She notes that Levi could be well positioned to outperform given the acceleration in its newly profitable e-commerce business as well as its efforts to diversify its U.S. wholesale business to higher-growth partners.
In addition to Goldman Sachs, Bank of America's Heather Balsky upgraded Levi stock from Neutral to Buy with a $20.00 price target. She believes that the market isn't fully valuing the company's recovery potential given its underlying brand strength, new distribution opportunities, and accelerated shift to casual apparel.
From a technical standpoint, the stock broke through upper trendline resistance to fresh highs. The relative strength index (RSI) moved into overbought levels at 72.54, while the moving average convergence divergence (MACD) remains neutral. These indicators suggest that the stock could see some near-term consolidation over the coming sessions.
Traders should watch for consolidation back into the stock's price channel of $18.00 to $21.00 over the coming sessions. If the stock breaks down from trendline support, traders could see a move toward longer-term trendline support at $20.00 or lower trendline support at around $18.00. If the stock breaks out, traders could see a move to fresh highs.
A price channel appears on a chart when a security's price becomes bounded between two parallel lines. Depending on the direction of the trend, the channel may be termed horizontal, ascending, or descending.
The Bottom Line
Levi Strauss shares extended their rally dating back to October after a pair of high-profile analyst upgrades. With the stock approaching overbought levels, traders should watch for some near-term consolidation before a further move higher.
The author holds no position in the stock(s) mentioned except through passively managed index funds.