Costco shares reaffirm outperform rating, sees significant global potential

On Thursday, Bernstein SocGen Group maintained its positive stance on shares of Costco Wholesale (NASDAQ: NASDAQ:COST), emphasizing the retailer's long-term growth prospects. The firm's analyst pointed out Costco's capacity to consistently produce low double-digit earnings per share (EPS) growth, attributing this to the company's robust execution and highly productive business model.

Despite acknowledging Costco's steep valuation, which exceeds 50 times the price-to-forward-earnings (P/FE) ratio, the analyst expressed confidence in the company's underappreciated international expansion possibilities.

The firm's assessment of Costco's future is grounded in a proprietary analysis of global market opportunities. The analysis suggests that Costco could potentially expand its presence to 45 markets, in contrast to the 14 where it currently operates. This expansion could include approximately 1,500 new warehouse locations outside the United States and Canada, a significant increase from the current count of over 160.

The analyst's optimism extends to Costco's earnings potential, with a price target (TP) of $1,062 set for the stock. This target is based on a 51.0x P/FE multiple, coupled with projected earnings per share ranging from $20.83 across the next four to eight quarters. The reiteration of the Outperform rating and the substantial price target highlight the firm's belief in Costco's ability to sustain earnings growth over the coming decades.

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