Costco’s Strong Sales Growth Offset by External Factors and Limited Upside Potential

Costco (COST – Research Report), the Consumer Cyclical sector company, was revisited by a Wall Street analyst today. Analyst Steven Zaccone from Citi maintained a Hold rating on the stock and has a $927.00 price target.

Steven Zaccone has given his Hold rating due to a combination of factors impacting Costco’s performance. The company’s April same-store sales (SSS) showed a positive trend, with an increase of 4.4%. However, when adjusting for gas deflation and foreign exchange, the SSS rose to 6.7%, and further adjusting for the Easter calendar shift, the growth was between 8.2% and 8.7%. Despite this strong performance, the stock’s recent gains, with Costco shares up 11% compared to the S&P 500’s 13%, suggest limited upside potential in the near term.
Additionally, the report highlights that while there was robust growth in e-commerce and certain product categories like food and fresh foods, the overall impact of external factors such as the Easter shift, gas prices, and foreign exchange rates played a role in the mixed results. Moreover, Costco’s strategic decisions regarding inventory management in light of potential tariffs and its pricing strategy relative to competitors are crucial considerations. These elements combined lead to a cautious outlook, justifying the Hold rating as the stock may not see significant movement beyond its current valuation.

In another report released yesterday, Wells Fargo also maintained a Hold rating on the stock with a $1,000.00 price target.