Morgan Stanley Price Target on Costco Wholesale (COST) to Reflect 2017 Estimates

Morgan Stanley reiterated an Overweight rating on Costco Wholesale (NASDAQ: COST), and raised the price target to $179.00 (from $163.00), to reflect 2017 estimates. Morgan Stanley is raising 2017 EPS estimate from $6.12 to $6.30 to incorporate a partial earnings benefit from two potentially powerful catalysts over the next 12 to 18 months.

Analyst Simeon Gutman commented, "We are raising our Price Target from $163 to $179, which represents 14% upside from here. This upward revision reflects two changes. First, we are rolling forward our valuation to reflect F'2017 estimates as they will be discounted one year from now. Second, we are modestly raising our 2017 EPS estimate from $6.12 to $6.30 to incorporate a partial earnings benefit from two potentially powerful catalysts over the next 12 to 18 months. These catalysts include the credit card changeover to Visa on April 1, 2016 and an eventual membership price increase. Together, these items may be worth $0.60-$0.75 of earnings over the next 12 to 18 months. Applying the current 27x multiple to this base implies $16-$20 in upside to the stock. At the same time, the prospects from increased earnings from these items should help protect downside in the near term, which is factored into our bear case of 10% downside."

For an analyst ratings summary and ratings history on Costco Wholesale click here. For more ratings news on Costco Wholesale click here.

Shares of Costco Wholesale closed at $156.45 yesterday.

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