Costco’s (COST) shares rose about 2% on Thursday after the wholesale retailer exceeded analysts’ expectations for its March sales figures. In response, Truist Financial called the numbers “solid” but kept its Hold rating on COST, noting that the stock already trades at about 48 times its annual earnings per share.
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Costco Grows Sales by 11% in March
During the five-week period that ended on April 5, Costco expanded its net sales to $28.41 billion, up 11.3% from $25.51 billion a year ago. The retailer’s total comparable sales from its warehouses and e-commerce operations that have been active for at least a year also grew by 9.4% year-over-year.
Ahead of the release, Telsey analyst Joseph Feldman had anticipated Costco’s total sales in March to increase by 7.7% year-over-year, boosted by higher gas prices and a weaker U.S. dollar.
Costco’s Business ‘Remains Strong’
In his assessment, Truist Financial’s five-star analyst Scot Ciccarelli noted that the pump price of gas jumping by 17.8% during the period helped Costco achieve mid-single-digit to high-single-digit growth in its core fresh food and non-food business as more customers trooped to its gas stations for cheaper prices.
This boost also helped Costco’s ancillary operations post growth in the mid-20% range. This refers to the retailer’s gas, pharmacy, in-store eye-care and food court businesses, among others.
“Overall, the business remains strong as the company caters its extreme value proposition to an increasingly value-driven consumer base,” Ciccarelli noted.
Analyst Flags Costco’s Valuation
Nonetheless, Ciccarelli sees the upside and downside potential for Costco shares — which has gained about 20% year-to-date — as roughly equal at the current valuation. This suggests that the analyst thinks the stock is not clearly cheap or expensive, prompting him and his team to remain on the lookout for “a more attractive point of entry.”
As a result, the Truist Financial analyst also maintained his $977 price target on COST, implying about 5% downside risk.
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.
However, the average COST price target of $1,090.50 only implies about 6% upside.
