Costco’s (COST) shares closed Thursday’s trading about 2% higher after the wholesale retailer posted a 13% sales growth in April, with help from the continued surge in gas prices. The rise is despite Truist Securities’ (TFC) refusal to upgrade its Hold rating on COST stock, citing the company’s high market valuation.
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Costco Grows April Sales to $24B
During the four-week period that ended on May 3, Costco generated $23.92 billion in net sales, up 13% from $21.8 billion seen during the same window a year ago. Its comparable sales — that is, sales from its warehouses and e-commerce operations that have been active for at least a year — also climbed 7.8% year-over-year.
In addition, sales made across the retailer’s digital channels climbed by 18.4% during the month, compared to a year ago. Costco also pointed out that its net sales for the first 35 weeks of its fiscal year were up roughly 10% to $197.18 billion from $180.05 billion last year.
“April had one additional shopping day versus last year, due to the calendar shift of Easter,” Costco noted in the report. “This positively impacted total and comparable sales by approximately one and one-half to two percent.”
Why Truist Remains Neutral on Costco
Reacting to the results, Truist’s five-star analyst Scot Ciccarelli reaffirmed his Hold rating on Costco’s shares. He also maintained his price target of $977, which only implies roughly 4% upside from the stock’s closing price of $1,012.06 on Thursday.
Ciccarelli pointed out that soaring gas prices, again, helped to boost Costco’s ancillary operations — that is, the retailer’s gas, pharmacy, in-store eye-care and food court businesses — by mid-30s percentage growth. Yet the analyst decided to remain on the sidelines, just like last month after Costco released its “exceptionally strong” March sales figures.
“At [Costco’s] current ~46x multiple, however, we think the risk/reward remains relatively balanced, so we continue to look for a more attractive point of entry,” Ciccarelli argued.
Is Costco Still a Good Stock to Buy?
Across Wall Street, Costco’s shares remain a Moderate Buy based on analysts’ consensus rating. This breaks down into 15 Buys, six Holds, and one Sell issued by 22 analysts over the past three months.
In addition, the average COST price target of $1,097.06 only implies about 8% upside.
