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Why Wall Street Lowered Its Target Price for Costco

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Ratings and target price

Although Amazon’s (AMZN) move to acquire Whole Foods (WFM) made analysts cautious about Costco (COST) stock, the majority of analysts covering Costco still maintain a positive outlook. On average, analysts rated it a 2.1 on a scale of 1.0 (indicating “strong buy”) to 5.0 (denoting “strong sell”).

Plus, of the 30 analysts who have rated Costco, 67.0% recommended a “buy,” and 33.0% maintain a “hold” rating. Moreover, given the company’s steep decline in stock price in the last few days, it’s trading about 17% below analysts’ 12-month price target of $184.27 per share.

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Analysts’ recent activity

Following Amazon’s announcement, an analyst at Deutsche Bank reduced Costco’s target price to $172.00 from $187.00 and downgraded the stock to “hold” from “buy.” Citing challenges, analyst Paul Trussel stated that increased competition and rivals ramping up their digital presence might hurt Costco’s membership renewal rates. Plus, Goldman Sachs downgraded Costco from “buy” to “neutral” and also lowered its price target to $176.00 from $197.00. Meanwhile, Stifel Nicolaus also reduced its price target to $173.00 from $191.00.

In contrast, Northcoast Research upgraded Costco stock to “buy” from “neutral.” Analyst Chuck Cerankosky stated that the company would benefit from a hike in its membership fee while its business remains less exposed to food deflation.

Peer comparison

Citing persistent challenges and increased competition, analysts maintain a neutral outlook on Costco’s peers, including Walmart (WMT) and Target (TGT). Of the 33 analysts covering Walmart, about one-third rated the stock as a “buy,” 58.0% rate it a “hold,” and about 9.0% maintained a “sell” rating. As for Target, 12.0% rated it a “buy,” 69.0% maintained a “hold,” and 19.0% rated it a “sell.”

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