Morgan Stanley Maintains Overweight, $97 PT on Costco

Morgan Stanley reiterates its Overweight rating and $97 price target on Costco Wholesale Corp. (NASDAQ: COST) as solid growth continues, but with softer margins.

Morgan Stanley comments, “Costco reported inline 1Q EPS, but missed our operating profit estimate as gross margins fell more than expected, driven by a decrease in merchandise margins. As 40% of the merchandise margin decline resulted from a foreign currency translation issue, the price investments appeared modest, and most grocers/discounters are suffering some margin drag from inflation (which has peaked), we are not concerned.”

COST closed at $85.76 per share on Thursday.