LEVI Moves Lower Despite Announcing 700 Job Cuts

Analyst sentiment surrounding the stock is optimistic, however

Digital Content Manager
Jul 8, 2020 at 11:18 AM
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The shares of Levi Strauss & Co. (NYSE: LEVI) are down 6.6% at $13.83 this morning, even after the iconic denim retailer announced late on Tuesday it would cut around 700 jobs in non-retail and non-manufacturing segments, or roughly 15% of its workforce, to save $100 million annually. The company also cautioned its business would take yet another hit on the second half 2020, despite an increase in sales as stores across the country reopen after coronavirus lockdowns. 

On the charts, LEVI has been working to recover from its all-time-low of $9.09 on April 3. The equity has chopped higher since then, with its 40-day moving average serving as both support and resistance over the past few months. However, although the shares rallied to the $16 level mark in early June, the equity has found overhead pressure at the $14 area in recent weeks. Longer term, Levi's stock continues to suffer, and is down 45.5% year-over-year.

Nonetheless, analysts were majorly optimistic toward the equity coming into today. Of the seven in coverage, five called it a "strong buy," and only two carried a tepid "hold" recommendation. Meanwhile, the consensus 12-month price target of $16.89  is a whopping 31.8% premium to current levels, meaning price target cuts could be in store for LEVI in the near future.

Shorts sellers are singing to a different tune, however. Short interest rose 4.4% in the most recent reporting period, and the 7.16 million shares sold short make up roughly 17% of LEVI's available float. In other words, it would take almost a full week for shorts to buy back these bearish beats. What's more, Levi stock's Schaeffer's put/call open interest ratio (SOIR) comes in at 1.10. This ranks in the 89th percentile of readings from the past 12 months -- indicating an appetite for puts over calls among short-term speculators.

That sentiment is echoed in the options pits, where puts are also preferred. LEVI sports a 10-day put/call volume ratio of 1.18 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 81% of readings from the last year, suggesting a much healthier appetite for puts than what is typically seen. 

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