On Friday, Costco Wholesale (NASDAQ:COST) saw an increase in its price target to $850 from the previous $800 by Stifel, with a sustained Buy rating on the stock. The adjustment comes after Costco reported its third-quarter fiscal year 2024 earnings, showcasing robust results with earnings before interest and taxes (EBIT) aligning closely with consensus expectations.
The company demonstrated a solid 6.5% comparable sales growth, which helped improve sales, general, and administrative (SG&A) expense leverage. Moreover, Costco's core-on-core gross margin expanded by 10 basis points year-over-year, contributing to an approximate 10% growth in earnings per share (EPS), excluding a charge from the prior year.
Membership figures have shown an 8% increase year-over-year, with the growth of Executive Members surpassing the overall rise. Renewal rates remained stable worldwide and saw a slight uptick of 10 basis points in the U.S. and Canada.
These indicators reflect positively on Costco's value proposition, suggesting that the company is successfully attracting and retaining customers, which is likely to support continued market share gains in most of its business segments.
Despite speculation about a potential increase in membership fees, management has not announced any changes, signaling confidence in the company's ability to maintain above-average profit growth without immediate adjustments to its fee structure.
In light of these strong performance indicators and financial results, Stifel has slightly lifted its EPS estimates for fiscal years 2024 through 2026. The new price target of $850 is based on 27 times the firm's projected 2026 EBITDA for Costco, reflecting optimism about the company's financial trajectory and market position.
InvestingPro Insights
Costco Wholesale's (NASDAQ:COST) recent earnings report and Stifel's subsequent price target increase to $850 underscore the company's robust financial health and market position. To add to the understanding of Costco's financial landscape, InvestingPro data offers a snapshot of its market valuation and performance.
With a significant market capitalization of $361.61 billion, Costco trades at a P/E ratio of 53.48, which is high compared to the industry average, indicating investor confidence in its future growth potential. Furthermore, the company's revenue growth over the last twelve months as of Q2 2024 stands at 6.16%, showing a steady increase in its business operations.
Two InvestingPro Tips that could be of interest to investors are that Costco holds more cash than debt on its balance sheet, suggesting a strong financial standing, and that it has maintained dividend payments for an impressive 21 consecutive years, reflecting a commitment to shareholder returns. Moreover, analysts have revised their earnings upwards for the upcoming period, which could imply further optimism surrounding the company's profitability.
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