Dollar drifts higher ahead of U.S. government reopening
Investing.com -- Oppenheimer has reinstated Costco Wholesale (NASDAQ: COST) as a Top Pick, citing the retailer’s attractive valuation, strong competitive positioning, and resilience in a mixed consumer spending environment.
“Following the recent re-rating in shares and with the company moving closer to lapping the most difficult comparisons, we are adding COST back to our top pick ranking,” analyst Rupesh Parikh wrote.
Costco shares have fallen roughly 15% from their mid-February highs, underperforming the S&P 500’s 12% gain.
Oppenheimer stated that this pullback makes the outperformance case even stronger, given Costco’s “superior value proposition” and exposure to “a relatively higher affluent customer.”
The firm lowered its price target to $1,050 from $1,130 “primarily reflecting the re-rating in the space,” but said that still implies about 15% upside.
Oppenheimer noted that Costco’s valuation has normalized, with its relative P/E of 1.89 times “essentially consistent with recent historical averages of 1.92x and well below a peak of 2.59x earlier this year.”
Parikh believes Costco is “well-positioned for the holiday season,” citing strong in-store checks and an “attractive assortment of Apple/CE products, gift cards, strengthening branded apparel selection, and a strong appliance value proposition.”
Oppenheimer also pointed to potential long-term catalysts, including the possibility of a stock split or special dividend, though management “has not signaled anything on these two potential catalysts lately.”
In the near term, Oppenheimer suggested taking advantage of any volatility from potential food stamp impacts related to a government shutdown.
“We believe COST would be less impacted than others, but not fully immune,” the firm wrote, adding that any such headwinds “would be temporary.”