Costco's (COST) Value Proposition Unmatched, Stock Remains Top Pick - Analysts Bullish on COST Despite PT Cuts

Shares of Costco (NASDAQ: COST) are trading over 3% lower in pre-market early on Friday, after the company's most recent earnings report, posted late last night.

The world's third largest retailer reported Q4 EPS of $4.20, narrowly beating the analyst estimate of $4.15. Revenue for the quarter came in at $72.09 billion, also slightly ahead of the consensus expectation of $71.64 billion.

Commenting on the stock's weakness, Rupesh Parikh of Oppenheimer believes the company fell victim to investors' "elevated expectations", noting "bottom-line delivery likely disappoints heightened investor expectations in our conversations following strong fuel upside at BJ and KR in their recent reports."

The analyst lowers his price target to $550 from $600 to reflect shrinking valuations across the board, but maintains an "Outperform" rating and advises to "take advantage of any weakness tomorrow". Oppenheimer sees potential "membership fee increase and a special dividend" as major catalysts in coming quarters.

A similar cautious yet highly positive tone is offered by Truist Securities' Scot Ciccarelli, as he cuts his price target to $559 from $571, but reiterates a "Buy" rating, claiming Costco's "value proposition remains unmatched."

The analyst also highlights the stock as a great buy in times of economic uncertainty, believing "the more difficult the economic environment becomes, the more important Costco becomes to its members, which results in even more traffic/sales and ultimately better buying power." He concludes by citing same "potential for future membership fee increases and the possibility of a 1x dividend" as key catalysts to look forward to.

Lastly, Corey Tarlowe of Jefferies kept as bullish as ever, noting "COST remains a Top Pick."

The analyst highlights further improvements in the business, as "gross margin of 10.2% came in ahead of cons. of 10.1%" and notes "the membership model drives predictable sales and profitability in an increasingly uncertain environment."

On the question of what’s not to like about the quarterly report, the analyst was blunt - "Nothing".

Jefferies reiterated a "Buy" recommendation with $610 price target on the shares.

By Vlad Schepkov

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