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Investing.com - Erste Group downgraded Costco Wholesale (NASDAQ:COST) from Buy to Hold on Tuesday, citing valuation concerns despite the retailer’s strong market position. The company currently trades at a P/E ratio of 53.4x and an EV/EBITDA multiple of 33.1x, supporting these valuation concerns.
The research firm noted that Costco ranks as the third-largest retailer globally, following only Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN), with particularly strong performance in the United States market. With a market capitalization of $418 billion and annual revenues exceeding $268 billion, Costco has maintained its position as a prominent player in the Consumer Staples Distribution & Retail industry.
According to Erste Group’s analysis, nearly half of all U.S. consumers shopped at Costco at least once during the past year, with 87% of those shoppers making multiple visits to the warehouse retailer.
The downgrade comes as Erste Group anticipates a slight weakening in Costco’s sales growth for the company’s next fiscal year, which begins August 31, 2025.
Erste Group indicated that Costco’s current price-to-earnings ratio appears elevated, even when compared to other companies in the retail sector, which the firm believes limits the stock’s potential for further appreciation.
In other recent news, Costco Wholesale reported June 2025 monthly sales of $26.4 billion, marking an 8.0% increase year-over-year. This growth was supported by a 5.8% rise in comparable sales and the opening of 25 new warehouses, contributing to a 2.8% increase in units. The company’s U.S. comparable sales growth excluding fuel and foreign exchange effects was consistent at 5.5% in June, matching May’s performance. Costco also announced a quarterly cash dividend of $1.30 per share, payable on August 15, 2025, to shareholders of record as of August 1, 2025.
Analysts have weighed in on Costco’s stock, with Bernstein reiterating an Outperform rating, citing the strength of the Kirkland brand and a price target of $1,153.00. William Blair also maintained its Outperform rating following the positive sales report. In contrast, Truist Securities reiterated a Hold rating with a $1,042.00 price target, focusing on the company’s valuation. Mizuho (NYSE:MFG) maintained a Neutral rating, setting a price target of $975.00, highlighting steady sales performance. These developments reflect a diverse range of analyst perspectives on Costco’s market position and future growth potential.
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