Argus Reaffirms Buy Rating On Costco, Cites Strong Traffic And Membership Renewals

Argus’ Christopher Graja believes Costco Wholesale Corporation's COST “financial strength and ability to deliver ‘extreme values’ are key differentiators for the stock in the current market environment.”

Graja maintains a Buy rating on the company, with a price target of $175.

Excellent Execution

The analyst mentioned an analysis of the company’s core operations indicates execution on the business plan continues to be excellent, with robust traffic and membership renewals.

“We believe that the company’s constant effort to deliver low prices keeps it relevant at a time when shoppers are looking for online bargains,” Graja said.

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In addition, given that over 50 percent of Costco Wholesale’s sales are contributed by food and sundries, the company is less vulnerable to internet competition.

Continued Growth Expected

Graja expects the company to see continued sales and EPS growth, given its focus on innovation to sustain its competitive advantage, which is selling products at lower prices.

The analyst also pointed out the Costco Wholesale’s business renewal rate in North America “remained in record territory” during 3Q16.

“In addition to making existing stores more productive, we expect the company to continue to add additional stores in both the U.S. and internationally,” Graja added.