Loop Capital cuts Costco price target to $1,110, keeps Buy rating

On Friday, Loop Capital Markets adjusted its outlook on Costco Wholesale (NASDAQ:COST) by slightly reducing the price target from $1,115 to $1,110, while reaffirming a Buy rating on the company’s shares. The adjustment by analyst Laura Champine comes as a proactive measure to incorporate a margin of safety in the face of prevailing economic uncertainties. According to InvestingPro data, analyst targets for Costco range from $610 to $1,225, with the stock currently trading at a P/E ratio of 58.8x. The company maintains a "GOOD" overall Financial Health score, supported by strong profit and growth metrics.

Champine’s valuation is based on a discounted net operating profit after taxes (NOPAT) model. Despite the minor price target reduction, Costco’s core same-store sales (SSS) performance surpassed consensus estimates for each segment of the quarter. The company’s membership fee income (MFI) experienced a 10.4% increase during the quarter, which was in harmony with Loop Capital’s projections. The company’s robust performance is reflected in its $268.8 billion revenue over the last twelve months, with a 5.9% year-over-year growth rate.

Costco’s strategy of delaying cost increases to consumers is seen as a factor contributing to its market share growth. The analyst anticipates that as inflation affects more products due to tariffs, Costco will have further opportunities to attract customers. However, it is expected that eventually, Costco will align with market pricing trends to maintain its standard margin levels. InvestingPro analysis reveals that while Costco’s gross profit margins are relatively modest at 12.8%, the company maintains strong cash flows and has consistently paid dividends for 22 consecutive years. For deeper insights into Costco’s financial health and 14 additional exclusive ProTips, consider accessing the comprehensive Pro Research Report.

The firm’s forecast for Costco’s fiscal year 2025 earnings per share (EPS) is set at $17.96, which is $0.16 below the consensus of $18.14. This conservative estimate reflects the expectation that Costco may absorb some of the inflationary pressures in the near term rather than passing them on to customers. Loop Capital’s sustained Buy rating underscores their belief in Costco’s ability to draw consumers to its clubs through its exceptional value proposition. The company’s strong market position is evidenced by its $447.6 billion market capitalization and impressive return on equity of 32%.

In other recent news, Costco Wholesale reported its third-quarter fiscal year 2025 earnings, revealing a 13% increase in net income to $1.9 billion. The company’s earnings per share (EPS) of $4.28 slightly surpassed the forecast of $4.24, although revenue fell short of expectations at $61.96 billion against a projected $63.11 billion. Analysts at Raymond (NSE:RYMD) James and Bernstein maintained an Outperform rating on Costco, with Bernstein raising the stock price target to $1,153, acknowledging the company’s strong financial performance. Costco’s comparable sales grew by 8%, excluding gas and foreign exchange impacts, and the company opened nine new warehouses during the quarter with plans for ten more in Q4. Membership fee income grew by 10.4%, contributing $1.24 billion to the company’s revenue. Raymond James highlighted Costco’s robust membership trends and digital engagement, while Bernstein noted the company’s potential for continued global warehouse expansion. Despite the positive outlook, Bernstein cautioned that Costco’s high valuation could pose risks if sales growth decelerates.

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