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On Friday, Bernstein analysts adjusted their outlook on Costco Wholesale (NASDAQ:COST) by increasing the price target marginally from $1,148.00 to $1,153.00. The firm maintained its Outperform rating on the stock. The adjustment followed Costco’s third-quarter fiscal year 2025 results, which surpassed consensus expectations. According to InvestingPro data, nine analysts have recently revised their earnings estimates upward for the upcoming period, reflecting growing confidence in the company’s performance.
Costco’s quarterly performance showcased an 8% comparable sales growth excluding gas and foreign exchange impacts. This growth came despite the company’s monthly sales figures being previously disclosed. Both gross and EBIT margins exceeded expectations, contributing to the company’s strong financial showing. The earnings per share (EPS) for the quarter was reported at $4.28, which was $0.05 higher than anticipated. InvestingPro analysis shows the company maintains robust financial health with an overall ’GOOD’ rating, supported by strong revenue growth of 6.13% over the last twelve months and total revenue reaching $264.09 billion.
Bernstein analysts highlighted Costco’s status as a top-tier company within their coverage area, emphasizing its potential for continued global warehouse expansion over the coming decades. Despite the positive outlook, they noted that Costco’s stock, trading at 58.79 times price-to-earnings (P/E), is highly valued, suggesting that it reflects a ’priced for perfection’ scenario. InvestingPro’s Fair Value analysis indicates the stock is currently overvalued, though it maintains strong fundamentals with a 33% return on equity and has consistently paid dividends for 22 consecutive years.
The report also indicated that while the company has been experiencing robust high single-digit comp sales growth, any deceleration in this trend could pose downside risks. Bernstein suggests that such a scenario might offer a more attractive entry point for investors considering the current high valuation of Costco’s shares. The analysts’ commentary underscores a cautious optimism for Costco’s future performance, balancing the recognition of its quality with the acknowledgment of potential market risks. The company’s five-year revenue CAGR of 11% and recent dividend growth of 27.45% demonstrate its consistent operational strength, though investors should note its current trading multiples remain elevated across various metrics.
In other recent news, Costco Wholesale Corporation reported its Q3 2025 earnings, demonstrating a strong financial performance. The company achieved a net income of $1.9 billion, marking a 13% increase year-over-year. Earnings per share (EPS) reached $4.28, slightly exceeding the forecast of $4.24. However, Costco’s revenue fell short of expectations, coming in at $61.96 billion against a projected $63.11 billion. In terms of expansion, Costco opened nine new warehouses in the third quarter and plans to open ten more in the fourth quarter.
Membership fee income for Costco also saw a notable rise, growing by 10.4% to $1.24 billion. The company’s strategic moves, including the introduction of over 40 new Kirkland Signature items and a partnership with Affirm for a buy now, pay later option, are aimed at enhancing customer experience. Analysts from Morgan Stanley (NYSE:MS) and JPMorgan have inquired about Costco’s pricing strategies and the impact of tariffs, with executives emphasizing their commitment to competitive pricing. These developments highlight Costco’s focus on maintaining value for its members amidst a challenging economic backdrop.
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