What Analysts’ Recent Activity Indicates about Costco Stock

A couple of analysts initiate coverage on Costco

On March 20, Nomura Instinet initiated coverage on Costco (COST) stock with a “neutral” rating and a target price of $230. Evercore ISI initiated coverage on the stock with an “outperform” rating and a target price of $260.

Nomura Instinet expects Costco to continue to report industry-leading comps. Higher membership renewal rates and increased membership fee income should further support the company’s financials. However, the company’s high valuation is keeping Nomura Instinet on the sidelines.

What Analysts’ Recent Activity Indicates about Costco Stock

Costco stock is trading at 29.8x its fiscal 2019 estimated EPS of $7.95 and 27.9x its fiscal 2020 estimated EPS of $8.51—both of which look expensive based on its expected growth rates of 12.1% and 7.0%, respectively, in those periods.

Meanwhile, Costco’s loyal membership base (as is evidenced by its high membership renewal rate) and ability to drive traffic and ticket size amid heightened competition from Amazon (AMZN) have made Evercore ISI positive on its stock.

Rating and target price summary

Of the 28 analysts covering Costco stock, 16 have given it “buy” ratings, and 12 have given it “holds.” Analysts have a consensus target price of $240.78 on Costco stock, which implies a potential upside of 1.6% based on its closing price of $237.05 on March 19.

In comparison, analysts prefer to remain on the sidelines on Walmart (WMT) and Target (TGT) stocks.