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What Analysts Recommend for Costco

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Mar. 9 2018, Updated 10:32 a.m. ET

Analysts remain positive on Costco

The majority of the analysts covering Costco (COST) continue to maintain a favorable outlook on the stock. Costco continues to outperform its peers including Walmart (WMT) and Target (TGT) with its stellar top-line and bottom-line growth rate. The company’s sales have grown at a double-digit rate over the past three quarters. Meanwhile, its bottom line registered a strong double-digit growth rate in the past four quarters. The company’s stellar performance is reflected in the steep uptrend in analysts’ price target recommendations as the graph below shows.

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Plus, analysts expect the company to register healthy comps growth in fiscal 2018 driven by price investments and focus on merchandising. Meanwhile, its bottom line is likely to maintain its momentum and is expected to see double-digit growth. However, increased competition and a growing threat from e-commerce players, mainly Amazon (AMZN), and other deep discounters are likely to dent its financials.

Rating and target price

Of the 30 analysts providing recommendations, 67.0% suggested a “buy” on Costco stock. Meanwhile, 33.0% recommend a “hold.” Moreover, analysts maintained a price target of $208.20 per share on Costco stock, which is 11.1% above its closing price of $187.36 on March 7, 2018. RBC lowered its price target on Costco stock to $205 per share from $209 following the fiscal 2Q18 results.

In comparison, analysts have a neutral view on Target and Walmart stock. Analysts expect margin headwinds from investments in price and its digital platform, and increased competition is likely to restrict its upside.

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