Loop Capital cuts Costco stock price target to $1,135

On Friday, Loop Capital Markets adjusted its price target on Costco Wholesale (NASDAQ:COST) shares, reducing it from $1,150 to $1,135, while continuing to recommend the stock as a Buy. According to InvestingPro data, Costco is currently trading above its Fair Value, with the stock showing a P/E ratio of 60.1x. The adjustment followed the release of Costco’s financial results which, despite surpassing sales expectations, reported earnings per share (EPS) that fell slightly short of the consensus.

Costco’s February core comparable sales showed a robust 8% increase, outpacing both Loop Capital’s and the consensus estimates of 7%. The company’s strong performance builds on its impressive revenue of $258.8 billion over the last twelve months, with a 5.4% year-over-year growth rate. This performance was achieved despite foreign exchange (FX) headwinds adversely affecting the international segments, which still managed to exceed consensus on a core basis. However, the combination of gas prices and FX fluctuations resulted in a 2.3% negative impact on the company’s headline comparable sales for the February quarter.

Despite the reported revenues exceeding consensus by $600 million, Costco’s EPS was seven cents below expectations. This shortfall was attributed to a slowdown in the expansion of gross margins, which InvestingPro data shows currently stand at 12.7%. Nonetheless, Loop Capital maintains its Buy rating on Costco shares, citing the retailer’s exceptional value proposition that continues to attract significant customer traffic to its stores. InvestingPro analysis highlights Costco’s strong financial health with a "GOOD" overall rating and its position as a prominent player in the Consumer Staples Distribution & Retail industry.

Loop Capital’s forecast for Costco’s fiscal year 2025 EPS stands at $18.70, which is $0.52 higher than the consensus estimate. This projection is based on the firm’s discounted Net Operating Profit After Tax (NOPAT) model. The firm’s analysts believe that Costco’s strong value offering will continue to drive consumer visits and support the company’s financial performance in the future. For deeper insights into Costco’s valuation and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro, which includes detailed analysis of the company’s financial health, market position, and future potential.

In other recent news, Costco Wholesale reported its second-quarter fiscal year 2025 financial results, revealing a mixed outcome. The company achieved revenue of $63.72 billion, surpassing analyst forecasts of $63.03 billion, but its earnings per share (EPS) of $4.02 fell short of the expected $4.09. Despite the revenue beat, the EPS miss led to some investor concerns. Analysts at Raymond (NSE:RYMD) James, Jefferies, and Evercore ISI have expressed confidence in Costco’s performance, with Raymond James maintaining an Outperform rating and Jefferies and Evercore ISI both raising their price targets to $1,180 and $1,100, respectively. These firms highlighted Costco’s strong sales growth, membership fee increase, and robust business model as key drivers of its success. Costco’s membership fee income rose by 7.4%, and e-commerce sales surged by 20.9%, emphasizing the company’s effective digital strategies. The retailer plans to open 28 new warehouses in fiscal year 2025, further expanding its footprint. Despite facing challenges like potential tariffs and foreign exchange fluctuations, analysts remain optimistic about Costco’s ability to maintain steady growth.

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