Costco Wholesale’s earnings report won rave reviews from Wall Street analysts. A falling share price suggests investors were disappointed by the lack of a membership fee increase, but that could create a buying opportunity.
Costco
stock (ticker: COST) is down 1.6% in premarket Wednesday trading at $544 despite earnings and sales beating consensus forecasts. Costco stock has risen 21% year to date, but the retailer’s reluctance to raise its membership fee looks to have put shareholders on the sidelines.
It might just be a matter of patience, according to analysts.
“With what we continue to view as the highest barriers to entry in all of retail due to its immense buying power and extreme value offering, as well as the potential for an eventual membership fee increase…we remain aggressive buyers of Costco,” wrote Truist analyst Scot Ciccarelli.
Ciccarelli raised his target price on Costco stock to $619 from $597, and kept a Buy rating. The target is based on a multiple of 39 times the company’s expected earnings per share over the next 12 months.
Costco has held its fee flat at $60 for its entry-level membership, and $120 for a premium version since 2017. That had some analysts scheduling a raise around now, but company executives refused to commit to a timeline for a raise on Tuesday in an earnings call.
Still, investors should be able to relax and enjoy Costco’s steady performance for now, according to TD Cowen’s Oliver Chen. He raised his target price to $680 from $600 and kept an Outperform rating on the stock, citing consistent traffic and share gains in non-food categories.
Even without the catalyst of a membership-fee increase, analysts are seeing value in the stock. BMO Capital Markets analyst Kelly Bania said a new target price of $612, based on a price-to-earnings ratio of 36 times Costco’s forecast 2025 profit, didn’t include any uplift from a fee increase.
“With Costco’s continued execution in a volatile retail backdrop, we believe [its] consistency stands out as another factor that supports its premium valuation,” Bania wrote. Her former price target on Costco stock was $600, and she continues to have an Outperform rating.
Write to Adam Clark at [email protected]
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