Stifel has maintained a Buy rating on Costco Wholesale (NASDAQ: NASDAQ:COST) and slightly increased the price target to $915 from $910.
The adjustment follows the retailer's reported August sales performance, which surpassed market expectations.
Costco Wholesale demonstrated robust sales growth in August, with a 7.1% increase in total comparable sales and a 6.7% rise in U.S. core comparable sales.
These figures exceeded the consensus estimates of 6.7% and 6.2%, respectively. The company's non-foods segment continued its upward trend with low-double-digit growth, marking the 10th consecutive month of positive growth.
This consistent performance indicates Costco's expanding market share in various discretionary categories.
The company's Food & Sundries and Fresh Foods departments also showed strong sales, with mid-single-digit and high-single-digit increases, respectively. These results align with the ongoing positive trends and suggest that Costco is gaining market share in grocery categories as well.
E-commerce sales saw a significant jump of 23.3% in August, building on the 19.5% growth observed in the fourth fiscal quarter of 2024. This represents a notable acceleration compared to previous quarters when analyzed on a two-year basis.
The consistent rise in traffic, which was up 6.6% globally and 6.0% in the U.S., indicates a slight sequential slowdown but remains higher than the levels seen from the first to the third fiscal quarters of 2024. This pattern suggests that Costco's value proposition continues to attract customers, encouraging frequent shopping visits and contributing to substantial market share gains.
Costco Wholesale's financial performance continues to draw attention from analysts. Baird maintained an Outperform rating for Costco, citing the company's steady 7.1% increase in global core comparable sales in August and a fiscal fourth-quarter net sales of $78.2 billion.
The firm has adjusted its forecast for Costco's fiscal fourth-quarter earnings per share (EPS) to $5.10, slightly above the consensus estimate of $5.07.
Citi also reaffirmed its Neutral rating on Costco, highlighting the company's consistent performance and strong sales in discretionary items.
On the other hand, Evercore ISI increased its price target for Costco to $925, emphasizing the company's strong momentum and significant growth in its e-commerce segment. Deutsche Bank (ETR:DBKGn) reiterated a Buy rating for Costco, noting the company's robust performance and consistent traffic increases.
DA Davidson maintained a Neutral rating on Costco, pointing out a slight decrease in total comparable sales due to a significant drop in gas prices during August. Despite this, the firm noted that U.S. traffic rose to 6.0% from 5.1%, indicating that Costco continues to attract consumers.
InvestingPro Insights
Costco Wholesale's recent sales performance has caught the attention of Stifel, leading to a positive outlook and an increased price target. In alignment with this perspective, InvestingPro data reflects Costco's significant market presence with a robust market capitalization of $392.79 billion. The company's revenue growth remains strong, with a 7.75% increase over the last twelve months as of Q3 2024, and an even higher quarterly growth rate of 9.07% for the same period. This growth is a testament to Costco's expanding market share and resonates with the 66.8% one-year price total return, indicating a bullish trend for the stock.
Adding to the financial picture, InvestingPro Tips highlight that Costco holds more cash than debt on its balance sheet, which is a reassuring sign of financial stability. Moreover, the company has maintained dividend payments for 21 consecutive years, showcasing its commitment to returning value to shareholders. These factors, coupled with the fact that 7 analysts have revised their earnings upwards for the upcoming period, suggest that investor confidence in Costco remains high.
While the company is trading at a high earnings multiple with a P/E ratio of 54.59, it is important to note that Costco is a prominent player in the Consumer Staples Distribution & Retail industry, which may justify such valuations. For readers interested in a deeper dive into Costco's financials and future outlook, there are over 15 additional InvestingPro Tips available at https://www.investing.com/pro/COST.
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