Wall Street has been on edge recently, trying to figure out what the Federal Reserve is likely to do in light of new economic data and persistent inflation. Although stocks got off to a slow start out of the gate Thursday morning, most major benchmarks recovered by midday to post modest gains.
However, the same wasn't true for a pair of individual stocks. Levi Strauss (LEVI -1.60%) announced quarterly earnings that left investors wondering what will come next for the apparel giant, while Super Micro Computer (SMCI -5.22%) had to deal with negative comments from Wall Street professionals who aren't entirely comfortable with the direction the company is taking.
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Levi Strauss heads lower
Levi Strauss shares were down 15% in early-afternoon trading on Thursday. The maker of iconic jeans had solid performance in its fiscal first-quarter financial report, but investors nevertheless worried about discounting and its potential impact on margin going forward.
Levi Strauss reported modest sales growth for the quarter that ended Feb. 26, with revenue rising 6% year over year to $1.69 billion. Results were strongest in Asia, where sales climbed 12% despite facing 10 percentage points of downward pressure due to adverse currency movements.
However, pressure on the bottom line was evident, as adjusted net income dropped to $135 million, down 29% from year-ago levels. Adjusted earnings came in at $0.34 per share, 12% lower than in the year-earlier period.
Levi Strauss did reaffirm its guidance for the full 2023 fiscal year, projecting between $6.3 billion and $6.4 billion in revenue and adjusted earnings of $1.30 to $1.40 per share. However, that would represent sales growth of just 1.5% to 3% compared to fiscal 2022.
Comments from the apparel company indicated that Levi Strauss expects to have to boost its levels of promotional activity, even as it has to overcome higher costs of doing business. That's not an attractive combination for shareholders, and it suggests that the jeans maker could face a tough road ahead trying to keep its profit levels as high as possible.
Super Micro doesn't look so super
Shares of Super Micro Computer were down 7% early Thursday afternoon. The hardware company was the subject of negative commentary from Wall Street analysts, and their comments had an adverse reaction on the share price.
Analysts at Wedbush downgraded shares of Super Micro Computer from neutral to underperform. They also maintained a $65 per-share price target on the stock, implying roughly 35% further downside from current levels, even after today's drop.
According to Wedbush, Super Micro has high internal expectations that it will be able to see revenue growth remain at the extremely high levels it has enjoyed over the past year and a half, bouncing back from what it believes will be a subpar performance in the first quarter of 2023. However, analysts are skeptical that the current macroeconomic environment will allow the hardware company to make good on its projections.
Investors have paid close attention to Super Micro lately, as the company was the subject of a negative report from a short-selling activist investor earlier this year. Many believe that the rise of artificial intelligence could help Super Micro, particularly because of its partnerships with key industry players like Nvidia. With a low valuation but vulnerability to macroeconomic conditions, shareholders can expect Super Micro shares to remain volatile.
