On Friday, Telsey Advisory Group maintained its optimistic stance on Costco Wholesale (NASDAQ:COST), affirming an Outperform rating and a price target of $1,000.00 for the NASDAQ:COST shares.
With a current market capitalization of $426 billion and trading near its 52-week high of $976.30, InvestingPro analysis suggests the stock is currently trading above its Fair Value. The firm's projection anticipates a robust total comparable sales growth of 5.0% for November 2024, an increase from the 3.5% figure recorded in the same month the previous year.
The anticipated growth comes despite expected challenges, including an approximate 150 basis points (bps) impact from gasoline prices and foreign exchange (FX) rates. Even with these factors, the core merchandise comparable sales are projected to rise to 6.5%, up from 4.4% in the prior year. This figure excludes the effects of gas and FX fluctuations. The company's strong performance is reflected in its impressive 68.26% total return over the past year, significantly outperforming many peers in the Consumer Staples sector.
In the United States, Costco's comparable sales, excluding gas, are expected to hit 6.5%, which is a significant jump from the 3.0% seen a year earlier. The forecast for Canada shows comparable sales, excluding gas and FX, at 7.0%, slightly down from 7.9% in the previous year. Other International locations are predicted to experience a 6.0% rise in comparable sales when excluding FX, which is a decrease from the 8.8% reported last year.
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Telsey's analysis suggests that Costco is poised to continue its positive sales trajectory, despite external pressures from gas prices and currency exchange rates. The firm's reaffirmed price target reflects confidence in the company's ability to achieve and maintain strong sales performance, supported by InvestingPro's "GREAT" Financial Health Score of 3.03 out of 5.
In other recent news, Costco Wholesale has reported a 1% year-over-year increase in Q4 2024 revenue, amounting to $79.7 billion, and a 9% rise in net income to $2.354 billion.
Additionally, the company's e-commerce sales saw a notable increase of 18.9%. Analyst firms such as Tigress Financial Partners, Oppenheimer, Baird, and Evercore ISI have responded positively to these developments, raising their price targets for Costco. However, DA Davidson and Citi have maintained Neutral stances.
Costco has also updated its executive bonus plan to include environmental and social performance criteria, effective for fiscal year 2025. Under the new plan, executives can earn bonuses for meeting environmental and social objectives, aligning executive incentives with broader corporate responsibility goals.
Despite potential disruptions from the ongoing dockworker strike at East Coast and Gulf Coast ports, Costco's sales performance remains robust. The company's distinctive shopping experience and ongoing store growth, both domestically and internationally, are expected to continue propelling long-term shareholder value. The retailer has recently hiked its membership fees as part of its strategy to deliver increasing value to its members.
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