LEVI and ULTA among 16 stocks ‘more insulated’ from tariffs, says Morgan Stanley

Morgan Stanley has identified 16 stocks that are less likely to lose value from tariffs imposed on imports from Canada, Mexico, and China, which take effect on Tuesday.

Levi Strauss (LEVI) and Ulta Beauty (ULTA) made the list due to their pricing power and strong market presence—factors that the firm believes will help these companies maintain sales even if costs rise.

Levi holds another ace up its sleeve: a diversified supply chain.

The jeans maker sources its products from China, Bangladesh, Vietnam, India, and Mexico. Three of these countries are not subject to tariffs, which gives Levi more flexibility to dodge Trump's trade war.

In its latest quarterly financial filing, Levi stated that it does not expect tariffs to negatively impact its business. Previously, the company revealed that less than 1% of the jeans it sells in the U.S. are manufactured in China.

Combined imports from China and Mexico account for only 15%-20% of Levi’s U.S. inventory.

Ulta Beauty, however, sees tariffs as a more significant risk. The cosmetics retailer warned in its 2024 annual financial report that the new tariffs “could materially harm our operations.”

The company also disclosed that it lacks long-term supply contracts, and online shipping data indicates that it imports products from China and the UK.

Analyst ratings of Levi and Ulta

Both Levi and Ulta are expected to see stock price gains this year, according to analysts. In January, Barclays rated Levi “overweight” and set a 2025 price target of $24. However, Morgan Stanley took a more neutral stance, rating the company “even” and lowering its target to $18.

“There are risks to LEVI, both external and internal, but we believe there is opportunity moving forward,” Barclays analyst Paul Kearney wrote.

One of Levi’s key challenges is the rising U.S. dollar, which could hurt its international shipping operations, the company’s CEO noted on a recent investor call.

A FactSet survey estimates Levi’s stock could reach $20.62—up 20% from Monday’s closing price. Analysts are more optimistic about Ulta, setting an average price target of $445 per share.

“ULTA remains a strong, durable business in a dynamic and attractive category. As the beauty industry continues to grow, ULTA’s top line should follow,” wrote Morgan Stanley analyst Simeon Gutman.

Tariff fallout

The S&P 500 fell 1.76% on Monday, sliding sharply after U.S. President Donald Trump stated that there was “no room left for Mexico or for Canada” to avoid tariffs.

If the tariffs go through, Imports from Canada and Mexico will face a 25% levy, while Chinese goods will be hit with a 20% charge.

Oil, automobiles, and auto parts—some of the largest imports from Canada and Mexico—will be particularly affected. In total, imports from these two countries were worth a combined $900 billion last year.

Energy imports from Canada will receive a lower 10% tariff, according to the White House.

In response, Canada announced retaliatory tariffs of 25% on $21 billion worth of U.S. exports. If the U.S. maintains its stance, Canada’s countermeasures could expand to cover $107 billion in trade within 21 days.

China is also implementing retaliatory tariffs, with duties ranging from 10% to 15% on key U.S. agricultural exports, including soybeans and corn.

"More insulated" stocks

Morgan Stanley’s list of 16 stocks that are “more insulated” from tariff-related pressures includes companies that have recently seen stock price declines but maintain strong consumer demand.

The full list includes:

• Ulta Beauty (ULTA)
• Albertsons Companies (ALI)
• Dexcom (DXCM)
• BJ’s Wholesale Club Holdings (BJ)
• Kroger (KR)
• Dollar General (DG)
• Nutanix (NTNX)
• Keysight Technology (KEYS)
• Five9 (FIVN)
• Vail Resorts (MTN)
• Planet Fitness (PLNT)
• Lifetime Group Holdings (LTH)
• IBM (IBM)
• United Rentals (URI)
• Tapestry (TPR)
• Levi Strauss (LEVI)