Analysts split on Costco ahead of earnings report

Experts say stock price has already factored in positive fundamentals

Costco drew mixed reviews from analysts ahead of the giant warehouse retailer’s Sept. 23 earnings report for the fiscal 2021 fourth quarter ended Aug. 29.

Barclays analyst Karen Short raised her earnings estimate for the Issaquah, Wash., company, but she cautioned that high earnings expectations already are priced into the stock.

Meanwhile, Oppenheimer analyst Rupesh Parikh sees “limited earnings upside” and also maintains that the company’s positive fundamentals already are reflected in the stock price.

Costco stock has jumped 22 per cent in the past three months amid strong consumer demand.

Short has an overweight rating with a $450 (U.S.) price target.

She increased her fiscal fourth-quarter earnings per share estimate to $3.72 from $3.40.

A survey of analysts by FactSet is looking for fiscal-fourthquarter GAAP earnings of $3.56 a share for Costco.

“(While) we expect strong results and continued momentum, the stock does reflect these high expectations,” Short said.

“So … despite our favourable view on COST, we believe there could be some risk going into the print.”

Parikh has an outperform rating and $500 price target for Costco.

“Following the recent outperformance, we believe the robust and accelerating comparable trends reported in recent months are now reflected in (the) shares,” he wrote.

“As a result, we see the setup on the print as less attractive. COST shares have not performed well on recent quarterly reports. We would take advantage of any profit-taking.”

Both Short and Parikh maintain their long-term bullish views.

“As we look forward, we expect market-share gains, inflation benefits, prospects for another special dividend and a potential membership fee increase next year,” Parikh said.