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Analyst Blog

Shares of Costco Wholesale Corporation (COST - Analyst Report) recorded a new 52-week high of $108.35 yesterday, before closing at $107.83, rising approximately 35.2% in a year’s span. Based on the current price, Costco is 1.6% above the Zacks Consensus average analyst price target of $106.11.

Moreover, it currently trades at a forward P/E of 23.7x, a 41.9% premium to the peer group average of 16.7x. Additionally, the company’s long-term estimated EPS growth rate is 13.2%, higher than the peer group average of 12.7%.

We believe Costco’s differentiated product range enables it to provide an upscale shopping experience to its members, resulting in market share gains and higher sales per square foot. Moreover, it maintains a healthy membership renewal rate.

Costco remains committed to opening new clubs in domestic and international markets. The company’s diversification strategy is a natural hedge against risks that may arise in specific markets.

This is evident from Costco’s healthy comparable-store sales results, when most of the retailers were struggling against the challenging macroeconomic factors including higher taxes and a soft employment scenario along with unfavorable weather conditions that restrained consumers from spending.

Costco delivered comps growth of 4% in March, reflecting comparable sales growth of 5% at its U.S. locations and 2% at international outlets.

Retailers like The Cato Corporation , Gap Inc. (GPS - Analyst Report) and The TJX Companies, Inc. (TJX - Analyst Report) witnessed comps decline of 11%, 1% and 2%, respectively during this period.

Currently, shares of Costco carry a favorable Zacks Rank #2 (Buy).

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