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Shares of Costco Wholesale Corporation (NASDAQ:COST) have lost 3% since August and Oppenheimer says now is a good time to be buyers of the stock.
The Analyst
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Rupesh Parikh upgraded Costco from Perform to Outperform with a price target lifted from $300 to $335.
The Thesis
Costco's stock gained 44% in 2019 while the S&P 500 gained 29%, but the 17 percentage point underperformance since August creates an "attractive entry point," Parikh wrote in the note. The stock's relative P/E now stands at 1.8 times versus 2.07 times back in August, which creates a "more attractive" valuation on a relative basis.
Looking forward to the second quarter, Parikh said investors are "well aware" the company will be up against a difficult comparison as Costco showed a 41.5% earnings per share growth last year. Although Street estimates look a little bit aggressive for the second quarter, any shortfall would "likely be bought" by investors in the current risk-on environment.
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The analyst said other bullish factors include Costco's international growth prospects which remains one of the best among retailers and discounters, the analyst wrote. In addition, a special dividend of around $10 per share could be declared in the coming quarter. The dividend estimate is based on the company having around $22 per share in cash after paying down $1.7 billion in debt this year.
Price Action
Shares of Costco were trading higher by 1% at around $308.
Related Links:
Costco Analysts Mostly Bullish After Q4 Earnings Beat, Growth In Membership, Traffic
Costco Defenders Come Out After Stock Downgrade
Photo credit: Mike Mozart, Flickr
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.