D.A. Davidson increased BJ’s Wholesale Club Holdings’ (BJ) price target to $55 (19.4% upside potential) from $50 and reiterated a Buy rating on the stock, citing the company’s growth prospects. Shares of the membership-only warehouse club chain operator rose 3.6% on Friday.
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D.A. Davidson analyst Michael Baker wrote in a note to investors that BJ’s Wholesale’s transformation initiatives would result in higher earnings, EBITDA, comparable-store-sales, and gross margins over the long-term. Notably, the company is investing in enhancing digital and marketing capabilities, geographical expansion, and increasing membership and assortments.
BJ’s Wholesale reported stronger-than-expected 2Q results on Aug. 20 as shoppers rushed to stock up on essential goods due to the shelter-in-place directives amid the COVID-19 pandemic. Its adjusted EPS increased by 97.4% to $0.77 and surpassed analysts’ expectations of $0.60. Revenues jumped 18.2% to $3.95 billion year-on-year and beat Street estimates of $3.73 billion. (See BJ stock analysis on TipRanks).
The company’s CEO Lee Delaney noted that “We delivered another remarkable quarter with strong comp growth and record profitability. Our business has been transformed and strengthened in the last six months by every measure.”
Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 8 Buys, 4 Holds, and 1 Sell. With shares up about 103% year-to-date, the average price target of $48.08 now implies a more modest upside potential of 4.3% from the current share price.
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