On Friday, Loop Capital increased its price target for Costco Wholesale (NASDAQ:COST), setting a new goal of $1,005, up from the previous $975, while continuing to recommend a Buy rating for the stock. The decision to raise the target comes after the company reported its earnings per share (EPS) for the August quarter at $5.29, surpassing the consensus estimate by $0.21. Notably, $0.14 of this beat was attributed to a one-time tax benefit.
Costco's sales growth for the quarter was modest at 1%, which was built on a 10% growth in the same quarter of the fiscal year 2023 (F4Q:23). The reported quarter had one fewer week than the comparable period last year, which impacted the total sales figures. Nevertheless, the company achieved a 9% increase in EPS, reflecting the calendar shift. Adjusting for the calendar difference and the tax benefit, the EPS growth would have been 13%.
Loop Capital's analyst cited the use of a discounted NOPAT (net operating profit after tax) model, which has been advanced by a year, as the basis for the revised price target. This valuation model underpins the firm's positive stance on Costco, highlighting the retailer's ability to attract customers and provide value.
The firm also shared an optimistic forecast for Costco's future earnings, projecting an EPS of $19.05 for fiscal year 2025 (F25), which is $1.25 higher than the consensus estimate. This bullish outlook reinforces Loop Capital's Buy rating, suggesting confidence in Costco's continued financial performance and appeal to consumers.
In other recent news, Costco Wholesale has been the subject of several analyst updates following its fourth-quarter earnings report. Costco posted earnings per share (EPS) of $5.29, surpassing both Goldman Sachs and consensus estimates, but fell slightly short of its revenue target of $79.70 billion.
Same-store sales saw a 6.9% increase, exceeding the anticipated 6.4%. Truist Securities raised its price target for Costco from $873 to $909 while maintaining a Hold rating, citing robust sales trends and consistent growth. However, the firm has expressed concerns about the sustainability of its valuation.
BMO Capital also adjusted its outlook on Costco, raising the stock's price target from $950 to $980 and maintaining an Outperform rating. This adjustment was based on better-than-expected gross margin percentages and comparable sales. Meanwhile, Baird maintained an Outperform rating and a price target of $975.00, highlighting Costco's significant gross margin expansion and strong comparable sales momentum.
Roth/MKM increased the price target for Costco shares to $755 from $676 but maintained a Neutral rating due to operational shifts within the company. Lastly, DA Davidson maintained a Neutral rating but increased the price target to $880, recognizing robust gross margins.
InvestingPro Insights
As Loop Capital sets a higher price target for Costco Wholesale (NASDAQ:COST), it's valuable to consider additional metrics that could influence investor decisions. According to InvestingPro data, Costco's market capitalization stands at a robust $399.64 billion, indicating the company's significant presence in the market. The P/E ratio, a measure of the company's current share price relative to its per-share earnings, is high at 55.9, suggesting that investors are willing to pay a premium for Costco's earnings potential.
InvestingPro Tips also highlight that Costco has maintained dividend payments for 21 consecutive years, showcasing its commitment to returning value to shareholders. Additionally, the company's strong cash position, holding more cash than debt on its balance sheet, provides financial flexibility and stability. These factors, combined with a high return over the last year, could underpin investor confidence in Costco's ability to sustain its growth trajectory and market position.
For those seeking a deeper analysis, InvestingPro offers numerous additional tips on Costco, providing a comprehensive view of the company's financial health and market prospects. These insights can be particularly beneficial for investors considering Costco's stock in light of the recent earnings report and Loop Capital's optimistic outlook.
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