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Why Analysts Have a Positive Outlook on Costco Stock

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Costco’s sales and EPS to continue to grow

Most of the analysts covering Costco (COST) stock maintained a positive outlook on its prospects. Analysts expect Costco to deliver strong comps growth despite facing heightened competition and tough YoY (year-over-year) comparisons.

Costco’s sales earnings growth rate is significantly higher than that of its peers, including Walmart (WMT) and Target (TGT). Costco’s value offerings and high membership renewal rates, coupled with cost and productivity savings measures, are expected to drive its sales and earnings higher.

In April, Wells Fargo analyst Edward Kelly upgraded Costco stock to “outperform” on the basis that Costco is expected to boost shareholder returns in 2018. These returns are expected to increase through special dividends, which are expected to drive its stock higher.

Kelly expects Costco to surpass analysts’ expectations in the coming quarters, reflecting strong membership renewal rates, higher comps, and lower taxes.

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Ratings summary and target price

Among the 29 analysts covering Costco stock, 72.0% suggested a “buy,” and 28.0% recommended a “hold” rating. Analysts maintained a consensus price target of $210.55 on Costco stock, which implies an upside of 7.4% based on its closing price of $196.04 on May 9.

In contrast, analysts maintained a “hold” rating on Walmart and Target stock. Margin headwinds from price investments, adverse mix, and digital fulfillment costs are expected to pressure the bottom-line growth of these retailers.

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