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On Friday, Evercore ISI, a respected research firm, increased the price target for Costco Wholesale (NASDAQ:COST) shares from $1,050.00 to $1,100.00. The firm also reiterated its Outperform rating on the company’s stock. Currently trading at $1,026.62, Costco’s stock has demonstrated strong momentum with a 31.4% return over the past year. The upgrade reflects Evercore ISI’s confidence in Costco’s ability to continue growing its membership base, increase store traffic, and demonstrate strong financial performance. InvestingPro data shows analyst targets ranging from $560 to $1,205, with a consensus recommendation leaning towards Buy.
According to Evercore ISI, the key drivers of Costco’s success include a 5.7% increase in global traffic, a 9% rise in core comparable sales, and a 10% growth in underlying EBIT, excluding the effects of foreign exchange. The research firm highlighted the strength of Costco’s loyalty-driven business model, which has been effective in leveraging its membership and top-line strengths. This is reflected in the company’s impressive revenue of $258.8 billion and robust return on equity of 30% over the last twelve months. InvestingPro analysis reveals 14 additional key insights about Costco’s financial health and market position.
The analyst from Evercore ISI acknowledged the potential risks facing Costco, such as the unpredictable impact of tariffs, wage inflation, technological investments, and increasing competition from rivals like Sam’s Club and BJ’s Wholesale Club (NYSE:BJ). Despite these challenges, Costco’s position appears robust, especially with the company entering the third quarter of a fee increase that is expected to lead to double-digit growth in membership fee income. The company’s financial stability is underscored by its 22-year track record of consistent dividend payments and strong cash flow position, with sufficient coverage for interest payments.
The research firm’s analysis suggests that Costco’s stock, trading at 49 times price-to-earnings (P/E) on projected calendar year 2026 earnings, commands a premium compared to the market and its own historical valuation. However, the firm believes that Costco’s status as a defensive growth stock with mega-cap scale justifies this premium. Evercore ISI’s base case assumes that Costco will maintain a multiple of 2.4 to 2.6 times against the S&P 500 on projected calendar year 2026 earnings, supporting the new $1,100 price target.
In other recent news, Costco Wholesale Corp (BVMF:COWC34). reported its financial results for the second quarter of fiscal year 2025, showcasing a mixed performance. The company’s earnings per share (EPS) stood at $4.02, slightly missing the analyst expectations of $4.09. However, Costco’s revenue exceeded forecasts, reaching $63.72 billion compared to the anticipated $63.03 billion, driven by strong sales in non-food categories. Membership fee income rose by 7.4%, while e-commerce sales saw a significant increase of 20.9%, indicating successful digital strategies. The company also announced plans to open 28 new warehouses in FY2025, highlighting its expansion efforts. Despite the revenue beat, the EPS miss contributed to investor concerns. Looking ahead, Costco projects full-year capital expenditures of $5 billion and anticipates challenges from tariffs and foreign exchange fluctuations.
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