Costco’s Strong Global Performance Overshadowed by High Valuation: Hold Recommendation

Wells Fargo analyst Edward Kelly has maintained their neutral stance on COST stock, giving a Hold rating yesterday.

Edward Kelly has given his Hold rating due to a combination of factors surrounding Costco’s recent performance and valuation. While Costco’s sales in May showed robust growth across various categories, the figures slightly missed expectations, particularly in the U.S. market. Despite this, international sales, especially in Canada and other regions, exceeded forecasts, showcasing Costco’s strong global presence.
However, the high valuation of Costco’s stock, trading at over 50 times next twelve months estimates, presents a challenge for potential upside. The consistent growth in a challenging economic environment is impressive, yet the current high multiple makes it difficult to justify a more optimistic rating. Therefore, while Costco remains a strong performer, the valuation concerns lead to a Hold recommendation.

Kelly covers the Consumer Defensive sector, focusing on stocks such as Walmart, Kroger Company, and Sprouts Farmers. According to TipRanks, Kelly has an average return of 9.5% and a 66.84% success rate on recommended stocks.

In another report released yesterday, Citi also maintained a Hold rating on the stock with a $1,065.00 price target.