UBS Reiterates Neutral Rating On Costco Wholesale Corp
UBS is neutral on Costco following release of sales data for August.
UBS has published a report on Costco Wholesale Corporation stock today, reaffirming its Neutral rating along with target price $153. The report was released after weaker than expected comps posted by the firm for the month of August.
The experts, revising the comps for August, said sales were according to the expectations of the investors, and therefore no substantial stock price movement is expected in any direction. The company posted a decline in comps of 2% for the quarter, while the analysts forecast had put this fall at 1.4%. The main comps sales for Costco increased by 5% for August, caused due to 7% growth in the global segment, and 5% growth in the United States. The total traffic for August grew by 3.75%, involving 1% adverse impact due to the shift in US and Canada for Labor Day weekend.
The leading performing regions in the United States that determined sales growth included San Diego, Los Angeles, Texas, and Midwest. Globally, Taiwan, Mexico and Australia were the top performers in domestic currency. On the basis of category, Fresh Food and Hardlines were the main performers, with the power in hardlines being determined by sporting goods, health and beauty acids, and hardware.
The analysts highlights that the company’s results for the month pointing out the strong points in its business model. The consumers are purchasing more from the stores to avail more membership value. The analysts believe that the retailer stores traffic might have been 5% more if figures had been adjusted for calendar movement.
The experts add that while the retailer performance has been robust, which has already been projected by the investors, therefore restricting the upside to the company’s stock. The target price of $153 depends on a 26x of multiple for the earnings per share forecast for CY16, and it depends on DCF/multiple analysis.
On the whole, the street is highly bullish about Costco Wholesale stock, with 21 out of 33 analysts giving it a Buy, 12 suggests it a Hold, and none rating it a Sell. The consensus stock price target stands at $156.67, reflecting 11.5% of upside potential from the closing price.
The highest price target is given by 4 analysts, Robert W. Baird & Co.’s Peter S benedict, BMO Capital Market’s Kelly Bania, Cowen and Company’s Oliver Chen, and Argus Research Corp.’s Christopher Graja. In the meantime, the most bearish price target is given by Robert Summers, an analyst at Macquarie.