Costco Wholesale (COST): MFI Helps But Doesn't Create An Inflection Point - Guggenheim
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Guggenheim analyst, John Heinbockel, reiterated his Neutral rating on shares of Costco Wholesale (NASDAQ: COST) noting that the next MFI should be a catalyst, but doesn't represent an inflection point.
The analyst believes sustained outperformance requires a reacceleration in domestic comp store sales. Prior to rallying 5% alongside the broad market, Costco shares had been unusually weak (-4% m/m, in line with S&P) as the timetable for the next membership fee increase (MFI) appears to have been pushed out vs. expectations. It may not happen this fall but, based on history, it could occur at any time and, when it does, it's likely to be a catalyst for the shares.
That said, because the actual benefit is relatively modest and the shares already trade at a 12x EBITDA multiple, sustained outperformance hinges on the re-acceleration in U.S. comps, largely because this will raise investor confidence in a lengthy secular growth runway. The analyst believes this re-acceleration is likely to materialize within the next 6-12 months.
Shares of Costco Wholesale closed at $149.36 yesterday.
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