On Thursday, Stifel, a financial services firm, increased its price target for Costco Wholesale (NASDAQ:COST) shares to $950, up from the previous target of $900, while reiterating a Buy rating on the stock. This adjustment comes in response to Costco's reported sales in June, which showed robust comparable store growth exceeding market expectations.
Costco's total and U.S. core comparable sales in June grew by 6.9% and 6.3%, respectively, surpassing the consensus estimates of 6.6% and 5.8%. The company's announcement of a membership fee increase in the U.S. and Canada, set to start in September 2024, is expected to incrementally boost pre-tax income by approximately 4% over two years, assuming minimal impact on renewal rates. This forecast is based on patterns observed during the previous three membership fee increases.
The retailer experienced a strong performance in its non-foods category, which saw low double-digit growth for the eighth consecutive month, indicating continued market share gains in discretionary segments.
Meanwhile, the Food & Sundries and Fresh Foods categories reported mid-single-digit and mid to high-single-digit increases, respectively, in line with recent trends and suggesting further gains in grocery market share. Additionally, customer traffic continued to show strength, with a global increase of 6.6% and a 5.9% rise in the U.S.
Stifel's revised price target of $950 is based on a 31x multiple of Costco's forecasted EBITDA for the fiscal year 2026. The firm anticipates that the membership fee increase will contribute to earnings growth through the fiscal year 2026.
In other recent news, Costco Wholesale has seen significant developments. The company announced a 6.3% rise in June's adjusted U.S. comparable sales, excluding gas, leading Oppenheimer to maintain its Outperform rating and raise the shares target to $950.
Costco's robust sales performance was notably driven by non-foods, including jewelry sales. The company also announced an increase in membership fees, a move expected to further bolster revenue.
Analyst firms Loop Capital and Baird have raised their price targets for Costco shares to $970 and $975 respectively, reflecting confidence in Costco's growth and financial performance.
In addition, Costco reported a 7.4% surge in net sales, amounting to $24.48 billion for June, and a 7.6% increase in revenues from membership fees. These recent developments provide investors with important updates on Costco's financial performance and strategic operations.
InvestingPro Insights
As Costco Wholesale (NASDAQ:COST) continues to demonstrate strong performance and growth, insights from InvestingPro provide additional context for investors considering the stock. With a market capitalization of $392.05 billion and a P/E ratio standing at 54.78, Costco's valuation is robust. The company's revenue growth remains healthy, with a 7.75% increase over the last twelve months as of Q3 2024, further supported by a gross profit margin of 12.5%.
An InvestingPro Tip highlights Costco's status as a prominent player in the Consumer Staples Distribution & Retail industry, which aligns with Stifel's positive outlook on the stock. Additionally, the company's ability to maintain dividend payments for 21 consecutive years, combined with a dividend growth of 13.73% over the last twelve months as of Q3 2024, showcases its commitment to shareholder returns. Investors should note that InvestingPro offers 19 additional tips on Costco, providing a comprehensive analysis for those looking to delve deeper into the stock's potential.
For investors seeking to leverage these insights, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro. This could be a valuable tool in making informed decisions about Costco's stock, especially in light of its recent sales performance and upcoming membership fee increase.
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