Wholesale retailer Costco (COST) offers the lowest prices compared to peers such as Walmart (WMT) and Amazon (AMZN), according to equity research firm Bernstein.
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Tariff-Driven Inflation Hits Discretionary Goods
Costco’s pricing competitiveness remains even as inflation has started to hit discretionary products such as fashion apparel, jewelry, home decor, and electronics following U.S. tariffs imposed in April last year.
In addition, Bernstein analyst Zhihan Ma pointed out that Costco’s competitiveness has persisted despite the low-single-digit increase in the price of consumables (examples are groceries and toiletries) since December across retail channels such as convenience stores and big-box or membership-based warehouse clubs. Ma reaffirmed her Buy rating on COST shares and set a price target of $1,170, which implies more than 18% upside.
“Among discretionary products we track, Costco remains the most price competitive, 14% cheaper than Walmart and 9% than Amazon on average based on the latest data (average per item),” Zhihan noted.
Costco to Gain from Energy-Driven Inflation
The Bernstein researcher further pointed out that Costco and Amazon are the leaders when it comes to retailers of everyday goods tracked by the company. She pointed out that while all retailers have raised prices since January, Target (TGT) remains the most expensive for a basket of such goods.
Ma believes that Costco’s lower prices are a reflection of the wholesale retailer’s strong value proposition. She contended that Costco and Walmart stand to gain the most as soaring energy prices add more uncertainty to the market.
The new rating comes as Costco recently delivered “exceptionally strong” March sales and has also been praised by Bernstein as having “a significant growth runway [for] another 50+ years.”
Are Costco Shares Good to Buy?
Across Wall Street, analysts continue to hold a Moderate Buy consensus rating on Costco’s shares. This is based on 16 Buys, six Holds, and one Sell issued by 23 analysts over the past three months.
Moreover, the average COST price target of $1,102 implies about 11% upside from current trading levels.
