Costco: Analysts’ Recommendations and Target Price
Analysts raised their target price
Costco (COST) reported stellar sales in November. The company’s comps were better than analysts’ expectations. As a result, several analysts raised their target price on the stock. JPMorgan Chase increased the target price on Costco stock to $200 per share from $190. Meanwhile, Stifel raised its target price to $185 from $179. Raymond James increased its target price on Costco 17% to $202 per share.
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Costco continues to impress with its sales numbers despite increased competition from Amazon (AMZN) and Walmart (WMT). The company is witnessing higher average shopping frequency in the US (SPY) combined with the increased average transaction. The company’s membership fee revenue continues to grow due to its higher fee and growing penetration in executive memberships. Also, square footage expansion supports the top-line growth.
Notably, the company’s bottom line is expected to have double-digit growth in fiscal 2018, which is rare given the current retail scenario. Retailers (XRT) are struggling to lift profitability amid the prolonged price war and growing mix of e-commerce sales. However, Costco’s margins are expected to remain pressured due to its price investments.
Rating summary and target price
About 62% of the analysts covering Costco stock recommend a “buy” and 38% maintained a “hold” recommendation. Analysts suggest a target price of $181.29 on Costco stock, which is 3.5% below the company’s closing price of $187.82 on December 5, 2017. In comparison, most analysts covering Target (TGT) stock maintained a “neutral” outlook.