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What Analysts Suggest for Costco Stock

Amit Singh - Author

Nov. 2 2017, Updated 9:05 a.m. ET

The majority of analysts recommend a “buy”

Costco (COST) stock has taken a beating in the past few months despite reporting strong sales numbers, as growing competition from Amazon (AMZN) and Walmart (WMT) is expected to dent the company’s prospects. Plus, the company’s investments in growth initiatives are projected to hurt its margins. However, the majority of analysts continue to maintain a positive outlook on Costco stock. The company’s stellar sales growth, driven by rising traffic and average transaction size, demonstrates Costco’s ability to thrive despite the growing threat from rivals.

Meanwhile, the company’s strong base of loyal customers and increasing membership fee income helps the company to fund most of its growth initiatives without affecting margins.

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Rating summary

About 62.0% of analysts covering the stock provided “buy” recommendations, and 38.0% maintained a “hold” rating. Moreover, Costco stock closed at $162.69 on November 1, 2017, reflecting a potential upside of 10.2% to the analysts’ 12-month target price of $179.21 per share. Meanwhile, most of the analysts recommend a “hold” on Target (TGT) and Walmart stock.

Valuation summary

Costco stock is trading at a forward PE multiple of 25.3x, which is significantly above the peer group average. Moreover, Costco’s current valuation is also higher than the S&P 500 (SPX-INDEX), which is trading at a forward PE ratio of 18.4x.

On the same date, Target stock was trading at a forward PE multiple of 13.3x, while Walmart was trading at a multiple of 19.5x.


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