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On Friday, Truist Securities adjusted its price target for Costco Wholesale (NASDAQ:COST) shares, raising it to $995 from the previous $935, while maintaining a Hold rating on the stock. The decision came after Costco reported another quarter of strong performance, with the company’s comparable sales proving to be the most robust and consistent among large-cap retailers, a trend that continued through the end of February. The retail giant, now valued at over $455 billion, has demonstrated impressive revenue growth, reaching $258.8 billion in the last twelve months. InvestingPro data shows the company maintains a "GOOD" financial health rating, supported by strong returns over the past decade.
Costco’s core Earnings Before Interest and Taxes (EBIT) margin also showed improvement for the eighth consecutive quarter. The retailer has been experiencing strength across various product categories, suggesting that its value proposition remains highly attractive to consumers who are still feeling economic pressure. According to InvestingPro, the company has maintained dividend payments for 22 consecutive years, demonstrating consistent shareholder returns despite operating with relatively thin gross profit margins of 12.7%.
Despite the positive performance indicators, Truist Securities holds a cautious stance on Costco’s stock valuation. The firm points out that Costco is currently trading at approximately 55 times this year’s earnings, which contrasts with the high single-digit to low double-digit expected earnings per share growth. This valuation presents concerns regarding the stock’s risk/reward balance, according to Truist Securities.
The analyst at Truist Securities emphasized the impressive results delivered by Costco but also highlighted the impact of the current valuation on the investment outlook. The maintained Hold rating indicates that while the firm acknowledges Costco’s strong quarterly performance and consistent growth, it advises a cautious approach to the stock based on the current earnings multiple. The updated price target reflects the analyst’s recognition of Costco’s solid financial results and market position.
In other recent news, Costco Wholesale reported its financial results for the second quarter of fiscal year 2025, which showed strong sales performance but earnings per share (EPS) slightly below consensus estimates due to foreign exchange impacts. Despite this, BMO Capital Markets maintained an Outperform rating with a $1,175 price target, highlighting Costco’s robust business model and record membership renewal rates. Loop Capital Markets adjusted its price target to $1,135, citing a slowdown in gross margin expansion but noting that revenues exceeded expectations by $600 million. Raymond (NSE:RYMD) James reaffirmed an Outperform rating with a $1,070 target, emphasizing Costco’s solid sales growth and strong membership trends.
Jefferies increased its price target to $1,180, recognizing the company’s consistent revenue and earnings growth despite margin constraints from foreign exchange factors. Evercore ISI also raised its price target to $1,100, pointing to Costco’s increased store traffic and strong financial performance as key drivers. Analysts across these firms generally express confidence in Costco’s ability to maintain growth, with expectations for continued market share gains and membership fee income growth. These developments reflect a positive outlook from analysts, who believe Costco’s business fundamentals remain strong despite external challenges.
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