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Cowen Remains Bullish On Costco Despite A Lack Of Substantial Catalyst

Cowen Remains Bullish On Costco Despite A Lack Of Substantial Catalyst
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Cowen expects “somewhat benign” results from Costco Wholesale Corporation (NASDAQ: COST) when the membership warehouse operator reports its first-quarter earnings Wednesday.

Analyst's Expectations

But, the brokerage reiterated its bullish stance on the stock given a powerful assortment of offerings and certain competitive advantages.

Cowen expects first-quarter revenue of $27.47 billion and 1 percent comp growth. It estimates EPS of $1.20, a penny above the Street.

“Traffic and comp acceleration in 2H of November is a known positive; meanwhile, food deflation, the Amazon overlap risk, and mixed weather impact are risk factors which may have elaboration,” analyst Oliver Chen wrote in a note.

Cowen said Costco is not immune to, Inc. (NASDAQ: AMZN)'s Amazon Prime, which could pose a greater threat to the company given a growing overlap of Prime and Costco members.

Ancillaries Could Save Costco

But, Costco has competitive advantages with respect to fresh food and other ancillary services including optical, pharmacy, travel and gas stations. These ancillary services are difficult to replicate online.

That said, Chen admits further work needs to be done at to improve convenience and the shopping experience.

However, the analyst believes Costco will benefit from new credit card relationship with Visa Inc (NYSE: V) and increased membership fees.

Rating And Justification

As such, Chen maintains his Outperform rating on Costco shares, with a price target of $170.

“We remain long-term buyers given superior merchandise execution, a captivated healthy customer base, and long-term store traffic success,” Chen added.

At last check, Costco shares were down 0.67 percent at $151.07.

Image Credit: By Namiwoo (Own work) [CC BY-SA 3.0], via Wikimedia Commons

Latest Ratings for COST

Jan 2018Gordon HaskettUpgradesAccumulateBuy
Dec 2017BMO CapitalUpgradesMarket PerformOutperform
Dec 2017Moffett NathansonInitiates Coverage OnBuy

View More Analyst Ratings for COST
View the Latest Analyst Ratings

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