Food and fuel inflation, rising interest rate, and excess inventory issues continue to hurt retailers. However, Costco (NASDAQ:COST) outperforms its peers with its strong comparable sales or comps growth rate and “remains in better shape than most” retailers, noted Jefferies analyst Corey Tarlowe. Tarlowe retains a Buy recommendation on Costco stock and has a price target of $580.
Don't Miss our Black Friday Offers:
- Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
It’s worth mentioning that Costco recently announced July comps growth that reflected a deceleration on a month-over-month basis. Costco’s comps increased about only 10% in July compared to an 18.1% growth in June.
While Costco’s comps growth slowed, it compared favorably to other retailers. Further, it remained high despite macro headwinds. For instance, Walmart (NYSE:WMT) and Kroger (NYSE:KR) reported mid-single-digit growth in their comps. Meanwhile, Target’s (NYSE:TGT) comps came in below 3%.
Further, Costco stock has significantly outperformed its peers in one year. It rose by about 26% in one year. In comparison, Kroger stock rose 7.6%, while Walmart and Target stock dropped 7% and 30% during the same period.
Tarlowe stated, “A number of retailers have called out softness in July, so Costco’s relative performance vs. June makes sense. Overall, we believe COST remains in better shape than most.”
The analyst added that Costco’s “business remains strong despite some softness in July,” with “all categories showing healthy growth.”
Along with Tarlowe, several analysts highlighted Costco’s ability to deliver above-average comps growth and increased their price target on COST stock.
Truist analyst Scot Ciccarelli increased the company’s price target to $571 from $543. Meanwhile, Rupesh Parikh of Oppenheimer raised the price target to $600 from $535.
What is the Prediction for Costco Stock?
Costco stock prediction on TipRanks shows that analysts are bullish about its prospects. Of the 18 analysts, 14 recommended a Buy, and four have a Hold recommendation. Overall, Costco stock sports a Strong Buy rating consensus on TipRanks. However, analysts’ average price target of $567.17 implies only 1.2% upside.
Nevertheless, Costco has a maximum Smart Score of 10 on TipRanks, implying it has a higher chance of beating the benchmark index.
Bottom Line: Momentum to Sustain for Costco
Despite macro headwinds, the momentum in Costco’s business will likely be sustained on the back of its value proposition and high membership renewal rate (90% worldwide and 92.3% in the U.S. and Canada). Moreover, leverage from Costco’s strong comps growth could help offset margin headwinds.
