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Costco Stock: Analysts’ Recommendations after Q3

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May. 31 2019, Published 9:53 a.m. ET

Analysts maintained a “buy” rating

For Costco, most of the analysts continued to recommend a “buy” rating, which reflected the company’s impressive sales and earnings growth. Jefferies raised its target price on Costco stock to $222 from $210.

Costco has posted higher comparable sales compared to Walmart (WMT) and Target (TGT). The company’s strong comps growth amid heightened competitive activity boosted investors’ confidence.

Costco’s value pricing, expanded offerings, high membership renewal rate, and square footage expansion continue to support its revenues. An improvement in the base business, tight control over costs, and the lower effective tax rate drove the double-digit growth in Costco’s EPS in the past several quarters.

We expect Costco to sustain the growth momentum in the coming quarters. However, the sales and earnings growth rate could moderate due to tough YoY comparisons. Uncertainty about the tariffs and Costco’s high valuation could limit the upside in its stock.

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Analysts’ ratings and target price

Among the 29 analysts, 16 recommended a “buy,” while 13 recommended a “hold” on Costco stock. The consensus target price of $251.08 implies an upside of 3.9% based on Costco’s closing price of $241.54 on May 30. Most of the analysts have a favorable outlook on Walmart. Most of the analysts continued to maintain a “hold” on Target stock.

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