Costco's Unique Retail Model And Solid Growth Stand Out In Challenging Market: Analysts

JP Morgan analyst Christopher Horvers reiterated the Overweight rating on Costco Wholesale Corporation COST with a price forecast of $1,090.

The analyst suggests that the ongoing global momentum in the business, share gains across various sectors and geographies (including e-commerce growth), and the company’s leverage to a cyclical upswing in big-ticket items (about 20% of the comp) contribute to its strong performance.

Additionally, the emerging benefits from advertising revenue make Costco’s fundamental story a challenge to the top companies covered by the analyst, including those in the consumer sector.

Per Horvers, no other major retailer has succeeded in every country it entered, and the club model ranks near autoparts, the top of the best sector in retail.

The analyst estimates Costco to report FY25 EPS of $18.24 and FY26 EPS of $19.67.

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Morgan Stanley analyst Simeon Gutman maintained the Overweight rating on the stock, raising the price forecast to $1,150 from $950.

The analyst notes that Costco’s results have consistently been among the best in retail, with the company delivering average comp growth of about 6% and EBIT growth of around 10% over the past decade.

Gutman suggests that the company’s earnings momentum is likely to continue accelerating in the next few quarters, driven by the appeal of its value proposition to a healthy upper-income consumer, the impact of past eCommerce work on conversion rates in 2025, and the upcoming flow of membership fee increases through the P&L.

It is highlighted that finding a business with Costco’s solid comp and membership growth is rare, and its relative insulation from e-commerce challenges sets its value proposition apart from other retailers. In the near term, the analyst expects incremental sales increases, and believes the company’s earnings power appears stronger despite elevated inflation.

Price Action: COST shares are trading higher by 0.98% to $998.06 at last check Friday.

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