Jefferies Raises Price Target On Costco Wholesale

Jefferies raised its price target on Costco Wholesale Corporation COST Thursday from $118 to $130 and maintained a Hold rating.

Analysts led by Daniel Binder noted that “Total reported SSS increased 5 percent, driven by a better-than-expected 9 percent US core performance. There was particular strength in fresh food, which saw L-MSD inflation, as well as broad strength in consumer electronics.

“An extra vendor funded promotion prior to Thanksgiving provided some lift, but we don’t expect a margin hit. Meanwhile, sliding gas prices should be margin accretive even with more aggressive pricing to competitors than usual.”

Binder adjusted his “Q1 EPS estimate up to $1.16 from $1.11, reflecting strong core comps and a margin benefit in gas. We would note that unless gas prices continue to slide, the margin benefit is likely to wane next quarter.”

The analyst note cited “Continued port strikes, deceleration in top-line growth if economic conditions change, slower margin gains ahead if the pace of gas price declines slows and increased store cannibalization overseas,” as potential risks.

The $130 price target was based on shares selling at about 23x the estimated FY 2016 EPS of $5.65.


Costco Wholesale recently traded at $142.60, down 0.36 percent.