Costco Analysts Are Bullish After Earnings Beat

Analysts are bullish on Costco after the retailer posted strong fiscal second-quarter earnings.
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Shares of Costco  (COST) - Get Report were falling Friday, along with the wider stock market, despite the warehouse retailer's strong second-quarter earnings and mostly bullish takes from Wall Street analysts.

J.P. Morgan (Overweight, Price Target Raised to $333 from $300)

“We believe COST continues to be a core holding given that its unrivaled value proposition (11% gross margins) to its fiercely loyal customer base (~90% renewal rate) and global growth opportunity (2-3% annually and likely double the current store base from here) are a rare combination in retail and consumer staples,” the analysts said.

Capital Markets (Outperform, Price Target Raised to $350 from $343)

“Sales trends were strong all month/quarter and then accelerated meaningfully as COVID-19 fears spread, Given the rising concerns over an economic slowdown, COST should provide investors with a relative haven. We remain buyers of COST,” analyst Scot Ciccarelli wrote.

Barclays (Equal Weight, Price Target Raised to $300 from $275)

“Cost continues to execute on all cylinders – and has proven (time and time again) that it is an unstoppable format in strong and weak macro-economic environments. Valuation, however, does reflect this strength with COST trading at 17.8x and 33.9x on FY21 EV/EBITDA and PE, respectively,” analyst Karen Short wrote.

Credit Suisse (Neutral, Price Target Unchanged at $328)

Costco delivered another sales-driven earnings beat in its fiscal second quarter, as a shortened Holiday season that dogged nearly all competitors was little more than an afterthought. Relative to our expectations, gross margins came in light (e-comm + fuel strength), but were offset by leverage on SG&A thanks to outsized comps,” analyst Judah Frommer wrote. 

Costco shares fell 2.25% to $308.67 in trading Friday. 

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