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On Friday, Stifel analysts maintained a positive stance on Costco Wholesale (NASDAQ:COST), reiterating a Buy rating and a price target of $1,075.00. The endorsement follows Costco’s second-quarter fiscal year 2025 results, which aligned with consensus expectations. With a market capitalization of $436 billion and an overall "GOOD" Financial Health Score according to InvestingPro, the company’s adjusted comparable sales for February showed an 8.3% increase, surpassing the predicted 7.4%.
Despite a slight decrease in core-on-core gross margin by 8 basis points year-over-year, Costco leveraged its selling, general, and administrative (SG&A) expenses. The analysts anticipate a modest rise in SG&A expenses in the upcoming quarters due to wage increases. However, they believe these costs will be largely balanced by productivity and sales leverage.
Another highlight from Costco’s report was a 7% year-over-year growth in membership fee income. The recent rise in membership fees is expected to contribute more significantly in the forthcoming quarters, particularly as Executive Member growth continues to outpace overall membership increases. Additionally, Costco experienced an uptick in renewal rates, with a 20 basis point and 10 basis point sequential increase in the U.S./Canada and worldwide, respectively. The company has maintained consistent dividend payments for 22 consecutive years, demonstrating strong financial discipline.
Stifel’s projections for Costco’s earnings per share (EPS) for fiscal years 2025-2026 remain mostly unchanged. The firm’s valuation of Costco at 33 times its forecasted 2026 EBITDA reflects confidence in the retailer’s capacity to gain market share and perform robustly, especially in the face of potential inflationary pressures. With 10 analysts revising earnings upward and a consensus "Buy" rating, Costco continues to demonstrate strong market positioning. For deeper insights into Costco’s valuation and growth prospects, access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Costco Wholesale reported strong financial results for the second quarter of fiscal year 2025, with notable growth in comparable sales and membership fees. However, earnings per share (EPS) were slightly below consensus estimates due to foreign exchange impacts, as noted by BMO Capital Markets. Despite this, BMO maintained an Outperform rating with a price target of $1,175, emphasizing Costco’s robust business model. Truist Securities raised its price target to $995 while maintaining a Hold rating, pointing out Costco’s impressive earnings before interest and taxes (EBIT) margin improvement, yet expressing caution over the stock’s valuation.
Loop Capital Markets adjusted its price target to $1,135 from $1,150, citing strong February sales despite some margin pressures. The firm continues to recommend a Buy rating, highlighting Costco’s ability to attract significant customer traffic. Raymond (NSE:RYMD) James reaffirmed an Outperform rating with a $1,070 target, praising Costco’s membership growth and consistent sales performance. The firm anticipates further expansion with approximately 25 new store openings in fiscal year 2025.
Jefferies increased its price target to $1,180, reiterating a Buy rating due to Costco’s solid comparable store sales and positive year-over-year trends. The firm highlighted the retailer’s resilience in maintaining growth amid external challenges. These recent developments underscore Costco’s strong market position and continued investor interest.
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