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Costco: Analysts’ Recommendations and Target Price Cuts

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Analysts’ recent activity

Costco (COST) stock received a series of downgrades and target price cuts following Amazon’s (AMZN) bid to acquire Whole Foods (WFM). Analysts remain skeptical about Costco’s prospects in the wake of increased competition and consumers’ shift towards online platforms where Costco lags its peers. In addition to BMO’s latest downgrade, analysts at Deutsche Bank and Goldman Sachs also downgraded Costco stock and reduced the target price.

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Deutsche Bank downgraded Costco’s rating to a “hold” from a “buy” and lowered its target price to $172.00 from $187.00. Meanwhile, Goldman Sachs maintained a “neutral” outlook on Costco stock (earlier “buy”) and reduced its price target from $197.00 to $176.00. Stifel Nicolaus lowered its target price on Costco stock to $173.00 from $191.00.

Ratings and target price

Despite recent downgrades, most analysts still have a positive outlook on Costco stock. Analysts maintain a score of 2.1 on Costco on a scale of 1.0 (representing “strong buy”) to 5.0 (reflecting “strong sell”).

Of the 30 analysts covering Costco, ~67.0% maintained a “buy,” while 33.0% recommended a “hold.” As of July 10, 2017, Costco was trading at $151.00, which reflects potential upside of 20.4%—compared to analysts’ 12-month target price of $181.85 per share.

Peer comparison

In comparison, analysts maintain a neutral outlook on Walmart (WMT) and Target (TGT). For Walmart stock, 33.0% of the analysts maintained a “buy,” 58.0% recommended a “hold,” and 9.0% recommended a “sell.” For Target, 13.0% of 23 analysts recommended a “buy,” 65.0% recommended a “hold,” and 19.0% recommended a “sell.”

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