Bank of America Reinstates Buy Rating on Costco
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Should l Buy COST?
Source: seekingalpha
- Strong Membership Growth: Costco's executive membership has seen a notable growth of 9% to 10%, with an annual fee of $130 compared to $65 for Gold Star members, indicating that consumers are willing to pay for enhanced benefits, thereby strengthening its appeal among higher-income consumers.
- Industry-Leading Pricing: Costco's pricing strategy is viewed positively as it continues to attract more value-conscious shoppers, which not only enhances customer loyalty but also has the potential to drive further market share growth.
- Reinvestment Strategy: By reinvesting profits back into pricing and wages, Costco enhances Bank of America's confidence in its ability to continue gaining share across categories, especially as consumers seek the best prices in the current economic climate.
- Target Price Setting: Bank of America has set a target price of $1,185 based on a 53X P/E multiple, believing that Costco can maintain mid-single to high-single-digit same-store sales growth while sustaining consistent margins.
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Analyst Views on COST
Wall Street analysts forecast COST stock price to rise
24 Analyst Rating
19 Buy
4 Hold
1 Sell
Strong Buy
Current: 986.740
Low
769.00
Averages
1061
High
1205
Current: 986.740
Low
769.00
Averages
1061
High
1205
About COST
Costco Wholesale Corporation (Costco) operates membership warehouses and e-commerce sites that offer a selection of nationally branded and private-label products in a wide range of categories. The Company buys the majority of its merchandise directly from suppliers and route it to cross-docking consolidation points (depots) or directly to its warehouses. It operates 891 warehouses, including 614 in the United States and Puerto Rico, 108 in Canada, 40 in Mexico, 35 in Japan, 29 in the United Kingdom, 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, and one each in Iceland, New Zealand and Sweden. It also operates e-commerce sites in the United States, Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia. The Company provides wide selection of merchandise, plus the convenience of specialty departments and exclusive member services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Costco Faces Membership Renewal Challenges
- Underperformance: Despite the S&P 500's 16% rise, Costco's stock has dipped 3% over the past year, indicating relative weakness in the market that could impact investor confidence.
- Declining Renewal Rates: Costco's global membership renewal rate fell from 90.4% to 89.7%, primarily due to lower engagement from digitally signed members, which may lead to future revenue uncertainty.
- Strategic Adjustments: To address the decline in renewal rates, Costco plans to enhance digital communications, promote auto-renewal features, and introduce additional perks to increase perceived membership value and loyalty.
- Future Growth Outlook: Despite renewal pressures, analysts expect Costco's net sales and EPS to grow at CAGRs of 8% and 11% from 2025 to 2028, indicating that its long-term investment value remains intact.
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- Revised Acquisition Offer: The revised offer from Paramount Skydance stands at $31.00 per share, a $1 increase from its previous bid, valuing Warner Bros. Discovery at approximately $108 billion, indicating strong acquisition intent.
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- CoreWeave's Capital Expenditure Surge: CoreWeave plans to invest $30 billion to $35 billion in data center construction for 2026, significantly exceeding the Street's estimate of $26.9 billion, and despite a sharp decline in shares, nearly all new capacity is allocated, indicating strong market demand.
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Bank of America Reinstates Buy Rating on Costco
- Strong Membership Growth: Costco's executive membership has seen a notable growth of 9% to 10%, with an annual fee of $130 compared to $65 for Gold Star members, indicating that consumers are willing to pay for enhanced benefits, thereby strengthening its appeal among higher-income consumers.
- Industry-Leading Pricing: Costco's pricing strategy is viewed positively as it continues to attract more value-conscious shoppers, which not only enhances customer loyalty but also has the potential to drive further market share growth.
- Reinvestment Strategy: By reinvesting profits back into pricing and wages, Costco enhances Bank of America's confidence in its ability to continue gaining share across categories, especially as consumers seek the best prices in the current economic climate.
- Target Price Setting: Bank of America has set a target price of $1,185 based on a 53X P/E multiple, believing that Costco can maintain mid-single to high-single-digit same-store sales growth while sustaining consistent margins.
See More
Amazon Plans Superstore Near Chicago, Competing with Walmart
- New Superstore Plan: Amazon is planning to open a 225,000 square-foot superstore near Chicago, expected to offer groceries, consumer goods, and general merchandise, aiming to compete for market share against rivals like Walmart.
- Retail History Lessons: Despite multiple failures in physical retail, including the closure of 72 Amazon Go and Amazon Fresh stores, this large-scale supermarket concept is viewed as Amazon's best chance for success in brick-and-mortar retail.
- Logistics Advantage: Amazon's robust logistics network enables next-day delivery, making product distribution to physical stores more efficient, thereby enhancing customer shopping experience and satisfaction.
- Membership Potential: With 200 million Amazon Prime members in the U.S., attracting them to physical stores could significantly boost sales, while also potentially converting more consumers into Prime members, thus driving online sales growth.
See More
Amazon Plans Superstore Near Chicago, Targeting Walmart's Market
- New Retail Strategy: Amazon plans to open a 225,000 square-foot superstore near Chicago, expected to offer groceries, consumer goods, and general merchandise, aiming to compete directly with Walmart's supercenters and expand its offline retail presence.
- Competitive Market Pressure: Despite a poor track record in physical retail, having closed 72 Amazon Go and Amazon Fresh stores, this new superstore initiative could be a pivotal strategy for Amazon to seek breakthroughs in a highly competitive market.
- Logistical Advantage: Amazon's robust logistics network enables next-day delivery, which will enhance operational efficiency for the new superstore and potentially attract more Prime members to shop in-store, thereby increasing sales.
- Market Potential: With 84% of U.S. retail spending still occurring offline, representing approximately $6 trillion in market opportunity, Amazon has significant growth potential if it can successfully draw in consumers, potentially boosting its market share.
See More
Costco Faces Membership Renewal Challenges
- Underperformance: Despite the S&P 500's 16% rise, Costco's stock has dipped 3% over the past year, indicating relative weakness in the market that could impact investor confidence.
- Declining Renewal Rates: Costco's global membership renewal rate fell from 90.4% to 89.7%, primarily due to lower engagement from digitally signed members, which may lead to future revenue uncertainty.
- Strategic Adjustments: To address the decline in renewal rates, Costco plans to enhance digital communications, promote auto-renewal features, and introduce additional perks to increase perceived membership value and loyalty.
- Future Growth Outlook: Despite renewal pressures, analysts expect Costco's net sales and EPS to grow at CAGRs of 8% and 11% from 2025 to 2028, indicating that its long-term investment value remains intact.
See More
Stock Index Futures Decline; Paramount Skydance Rises Amid Takeover News
- Paramount Skydance Acquisition Update: Paramount Skydance rose 4.96% in premarket trading after Netflix announced it would not raise its bid for Warner Bros. Discovery, with the board deeming Paramount's takeover proposal as 'superior.'
- Revised Acquisition Offer: The revised offer from Paramount Skydance stands at $31.00 per share, a $1 increase from its previous bid, valuing Warner Bros. Discovery at approximately $108 billion, indicating strong acquisition intent.
- Meta AI Chip Challenges: Meta Platforms fell 1.37% before the opening bell due to difficulties with its internally developed AI chips, leading to the scrapping of its most advanced design and a shift to a simpler version, which may impact its AI development strategy.
- Amazon's AI Development Strategy: Amazon declined 0.97% in premarket trading as it plans to use its proprietary Trainium and Inferentia processors to develop AI models, aiming to build them at a fraction of the cost compared to pure-play AI providers, enhancing its competitive edge in the AI landscape.
See More
Dell Technologies Reports Strong Quarter, Stock Rises 12%
- Dell's Strong Earnings: Dell Technologies reported a blowout quarter driven by AI buildout, resulting in a 12% stock increase, with AI server revenue expected to double to approximately $50 billion in the new fiscal year, highlighting the company's robust growth potential in the AI sector.
- CoreWeave's Capital Expenditure Surge: CoreWeave plans to invest $30 billion to $35 billion in data center construction for 2026, significantly exceeding the Street's estimate of $26.9 billion, and despite a sharp decline in shares, nearly all new capacity is allocated, indicating strong market demand.
- Block's Workforce Reduction: Jack Dorsey's Block announced a 40% workforce cut, stating that intelligence tools have changed company operations, and despite flat revenues in 2025, Morgan Stanley upgraded its rating from hold to buy, reflecting confidence in its potential growth.
- Zscaler's Underwhelming Performance: Although Zscaler delivered a beat-and-raise quarter, its shares fell 11% in premarket trading, indicating market caution regarding software valuations, as analysts remain skeptical about future profitability in the sector.
See More
Bank of America Reinstates Buy Rating on Costco
- Strong Membership Growth: Costco's executive membership has seen a notable growth of 9% to 10%, with an annual fee of $130 compared to $65 for Gold Star members, indicating that consumers are willing to pay for enhanced benefits, thereby strengthening its appeal among higher-income consumers.
- Industry-Leading Pricing: Costco's pricing strategy is viewed positively as it continues to attract more value-conscious shoppers, which not only enhances customer loyalty but also has the potential to drive further market share growth.
- Reinvestment Strategy: By reinvesting profits back into pricing and wages, Costco enhances Bank of America's confidence in its ability to continue gaining share across categories, especially as consumers seek the best prices in the current economic climate.
- Target Price Setting: Bank of America has set a target price of $1,185 based on a 53X P/E multiple, believing that Costco can maintain mid-single to high-single-digit same-store sales growth while sustaining consistent margins.
See More
Amazon Plans Superstore Near Chicago, Competing with Walmart
- New Superstore Plan: Amazon is planning to open a 225,000 square-foot superstore near Chicago, expected to offer groceries, consumer goods, and general merchandise, aiming to compete for market share against rivals like Walmart.
- Retail History Lessons: Despite multiple failures in physical retail, including the closure of 72 Amazon Go and Amazon Fresh stores, this large-scale supermarket concept is viewed as Amazon's best chance for success in brick-and-mortar retail.
- Logistics Advantage: Amazon's robust logistics network enables next-day delivery, making product distribution to physical stores more efficient, thereby enhancing customer shopping experience and satisfaction.
- Membership Potential: With 200 million Amazon Prime members in the U.S., attracting them to physical stores could significantly boost sales, while also potentially converting more consumers into Prime members, thus driving online sales growth.
See More
Amazon Plans Superstore Near Chicago, Targeting Walmart's Market
- New Retail Strategy: Amazon plans to open a 225,000 square-foot superstore near Chicago, expected to offer groceries, consumer goods, and general merchandise, aiming to compete directly with Walmart's supercenters and expand its offline retail presence.
- Competitive Market Pressure: Despite a poor track record in physical retail, having closed 72 Amazon Go and Amazon Fresh stores, this new superstore initiative could be a pivotal strategy for Amazon to seek breakthroughs in a highly competitive market.
- Logistical Advantage: Amazon's robust logistics network enables next-day delivery, which will enhance operational efficiency for the new superstore and potentially attract more Prime members to shop in-store, thereby increasing sales.
- Market Potential: With 84% of U.S. retail spending still occurring offline, representing approximately $6 trillion in market opportunity, Amazon has significant growth potential if it can successfully draw in consumers, potentially boosting its market share.
See More
