Two Analyst Notes Boost Shares of Costco and Amazon — Here’s Why

Costco Wholesale (COST) stock faced challenges on Friday despite the company’s strong performance in its fiscal 2024 third quarter earnings. Although Costco exceeded revenue and earnings expectations, the company opted to keep membership fees unchanged.

For the 12 weeks ending May 12, Costco reported a 9.1% year-over-year increase in revenue, reaching $58.5 billion. Comparable store sales rose 6.5% when adjusted for gasoline prices and foreign exchange fluctuations, while e-commerce sales soared 21%, driven by strong demand for gold bars and silver coins. Additionally, Costco’s earnings per share (EPS) jumped 29% from the previous year to $3.78.

These results surpassed analysts’ expectations, as Wall Street anticipated revenue of $58.1 billion and earnings of $3.70 per share, according to CNBC.

During the earnings call, Costco Chief Financial Officer Gary Millerchip addressed questions about a potential membership fee increase. Although the company is beyond the typical five-year mark for such an increase, Millerchip explained that Costco is considering “high inflation and the risk and concern around recession” before making a decision.

Costco also reassured customers that the price of its $1.50 hot dogs will remain unchanged, despite cutting off access to non-members earlier this year. Millerchip confirmed during the earnings call that the “price is safe.”

Is Costco Stock a Buy, Sell, or Hold?

Analysts remain optimistic about Costco’s prospects. According to S&P Global Market Intelligence, the consensus target price for COST stock is $805.82, indicating a potential upside of about 1% from current levels. The consensus recommendation is a Buy.

UBS is particularly bullish on Costco, assigning a Buy rating with a $940 price target. UBS Global Research analyst Michael Lasser highlighted Costco’s market share gains, strong worldwide traffic growth, outperforming discretionary business, and the highest operating margin in nearly 24 years. Lasser believes Costco will continue to strengthen its dominance in the retail industry in the coming years.

The $940 price target represents an implied upside of about 18% from current levels.