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On Friday, Raymond (NSE:RYMD) James analyst Bobby Griffin reaffirmed an Outperform rating and a $1,070.00 price target for Costco Wholesale (NASDAQ:COST), following the company’s second-quarter fiscal year 2025 earnings report. Griffin highlighted Costco’s solid sales performance, which included a 9.1% year-over-year comparable sales growth, excluding gas and foreign exchange impacts, and strong membership trends. The company’s revenue reached $258.8 billion in the last twelve months, with a healthy 5.4% growth rate.
Costco’s stock has seen a significant increase, rising 33% over the previous 12 months, outpacing the S&P 500’s 12% gain. Despite the elevated valuation, Griffin pointed to Costco’s long-term fundamentals as highly attractive. The company’s consistent traffic, robust membership growth, and high renewal rates contribute to predictable recurring revenue streams.
Looking ahead, Raymond James anticipates approximately 25 net new Costco openings in the fiscal year 2025. The firm also expects the company to continue gaining market share in both food and non-food categories, bolstered by Costco’s clean balance sheet and robust free cash flow of $5 billion. With more cash than debt on its balance sheet and strong cash flows to cover interest payments, these factors are believed to provide Costco with continued capital flexibility.
Griffin underscored Costco’s resilient business model and sticky customer base, evidenced by a 93% U.S. membership renewal rate. He also noted that Costco’s club warehouse model is particularly advantageous in an inflationary environment, as consumers look for value. The scale of Costco’s operations, with a market capitalization of $456 billion, is seen as a key factor enabling the company to better manage cost pressures, including those from potential tariffs, compared to its peers. The company maintains strong financial health metrics, earning a "GOOD" overall rating from InvestingPro, with particularly high scores in profitability and price momentum.
In other recent news, Costco Wholesale Corp (BVMF:COWC34). reported its financial results for the second quarter of fiscal year 2025, highlighting a mixed performance. The company posted earnings per share (EPS) of $4.02, which fell short of analyst expectations of $4.09. However, revenue outperformed forecasts, reaching $63.72 billion against the anticipated $63.03 billion. Membership fee income saw a 7.4% increase, and e-commerce sales surged by 20.9%, reflecting strong digital strategies.
Jefferies analyst Corey Tarlowe raised Costco’s stock price target to $1,180, citing the company’s robust comparable store sales and growth in membership fees. Evercore ISI also lifted its price target for Costco to $1,100, highlighting Costco’s 5.7% increase in global traffic and a 9% rise in core comparable sales. Both firms maintained positive ratings, with Jefferies reiterating a Buy rating and Evercore ISI an Outperform rating, underscoring confidence in Costco’s business model and growth potential.
Despite challenges such as foreign exchange impacts and tariff uncertainties, Costco’s business fundamentals remain strong, with planned expansions including 28 new warehouses in FY2025. The company’s ability to navigate these factors and maintain consistent performance contributed to the optimistic outlook from analysts.
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