An end to the pandemic would let Costco cut virus-related spending.
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Costco Wholesale dropped after its most recent earnings report, but BofA Securities says that was just a temporary setback for the discounter.
Analyst Robert Ohmes reiterated a Buy rating on Costco Wholesale (ticker: COST) on Monday, although he is now less optimistic about the chain’s earnings and stock. He lowered his target for the share price to $415 from $422 and reduced his estimate for full-year earnings per share by a dime, to $9.75, after the company disclosed mixed results for its fiscal second quarter on Thursday
Ohmes is one of many analysts who have argued investors should take advantage of the post-earnings price slump. Costco shares are down 15.8% since the start of the year, but were flat at 317.28 on Monday. The shares have gained 5,1% in the past 12 months.
The analyst said that sales at stores open at least a year will increase by 7% in Costco’s third quarter, given that sales were weak in April following a flurry of pandemic-related buying in March. Growth will be harder to achieve in the fiscal fourth quarter as the U.S. returns to a more normalized environment, giving people more options, such as travel and dining out, for how to spend their money.
A silver lining to the end of the pandemic, meanwhile, will be an end to the increased costs associated with the virus, Ohmes said. That spending has topped $1 billion in the past year. The company also recently said that it would raise wages, following similar announcements from other retailers.
He predicted that the company will continue to see robust membership growth, and that high customer loyalty will help it maintain market-share gains achieved during the pandemic.
Write to Teresa Rivas at [email protected]
