Bernstein reiterates Outperform rating on Costco stock, maintains $1,140 target

Investing.com - Bernstein SocGen Group has reiterated an Outperform rating on Costco Wholesale (NASDAQ:COST) with a price target of $1,140.00, following an investor webinar with the company’s CFO Gary Millerchip. According to InvestingPro data, Costco currently trades at a premium valuation with a P/E ratio of 52x, suggesting the market has high growth expectations for this retail giant.

The firm noted that Costco continues to face challenging year-over-year comparisons, particularly from last year’s Southwest Airlines gift card sales. Gold sales represent another difficult comparison point, though Bernstein observed that recent inflation has sustained high demand for this category. Despite these challenges, InvestingPro data shows Costco maintaining strong revenue growth of 8.2% over the last twelve months, with revenue reaching $275.2 billion.

Costco plans to accelerate warehouse expansion to approximately 30 new locations annually over the next decade, up from its previous range of 25-30 stores per year. While the United States remains the primary near-term growth driver, the company expects international markets to contribute nearly half of new additions in coming years. The company’s expansion plans are supported by its robust financial health, with InvestingPro analysis showing strong cash flows and more cash than debt on its balance sheet.

The retailer’s e-commerce strategy emphasizes member trust through transparent online pricing and a curated marketplace approach rather than offering an unlimited product selection. Bernstein highlighted this focus on trust as consistent across both physical and digital channels.

Bernstein also pointed to retail media as a significant growth opportunity for Costco, calling it a "gold mine" of member data that remains "underappreciated" as a potential revenue source.

In other recent news, Costco Wholesale reported September comparable sales growth that surpassed analyst estimates, driven by increased foot traffic and higher spending per customer. Despite this positive performance, Mizuho adjusted its price target for Costco to $950, down from $975, citing a slowdown in U.S. comparable sales growth. DA Davidson maintained a Neutral rating with a $1,000 price target, noting a deceleration in total comparable sales growth to 5.7% in September from 6.3% in August.

Meanwhile, UBS reiterated its Buy rating with a $1,205 price target, highlighting Costco’s strong performance despite a challenging year-over-year sales comparison. The firm attributed last year’s higher figures to increased consumer spending related to Hurricane Helene and anticipated port strikes. BTIG initiated coverage on Costco with a Buy rating and a $1,115 price target, emphasizing the retailer’s significant customer loyalty as a driver for continued traffic and sales growth.

These developments reflect varying perspectives from investment firms on Costco’s financial outlook and growth trajectory.

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