Costco (NASDAQ:COST) continues to deliver stellar financial and operating performances that push its stock price higher. It’s worth noting that Costco stock surged over 51% this year, outperforming the NASDAQ 100 Index by a significant margin.
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Continuing with its consistent performance, Costco recently delivered stronger-than-expected Q1 financials. EPS of $2.98 on revenues of $50.4 billion topped Street estimates. Meanwhile, its membership renewal rate and membership fee income registered healthy growth.
What’s Ahead?
In response to its Q1 performance, Stephanie Wissink of Jefferies stated that Costco’s comparable sales “remain robust,” and she praised management for “outperforming on other key measures.”
The analyst also remained impressed with Costco’s strong membership fee income, higher renewal rates, and SG&A (selling, general, and administrative) controls.
It’s worth noting that Costco’s membership fee income increased by 9.9% in Q1, while its renewal rates improved both in North America and worldwide. Costco’s CFO, Richard Galanti, stated that its membership renewal rates continue to benefit from increased penetration of executive members and higher auto-renewals.
Looking ahead, Wissink sees increased e-commerce offerings, membership fee hikes, and special dividends as key catalysts.
She added that Costco’s “healthy inventory” validates near-term gains. Moreover, Costco’s “growth sustainability & execution” supports its higher valuation multiple.
Wissink reiterated a Buy rating on Costco stock with a price target of $606.
Wall Street’s Take
On TipRanks, Costco stock has received 19 Buy and 6 Hold recommendations for a Strong Buy consensus rating. Meanwhile, Costco stock has positive indicators from hedge funds and investors.
TipRanks’ Hedge Fund Trading Activity tool shows hedge funds added 142.3K Costco shares to their holdings over the past three months. Meanwhile, TipRanks’ Stock Investors tool shows that 3.3% of investors who hold portfolios on TipRanks have increased their exposure to Costco stock in the past month.
Meanwhile, the average Costco price target of $556.44 implies 1.6% downside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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