Costco's Stock Surge: What's Next, According to Wall Street

Costco Wholesale Corporation (COST) has been on a tear, with its stock price soaring 35% over the last 12 months. The company's impressive performance has caught the attention of Wall Street analysts, who have been busy updating their price targets and earnings estimates. Let's dive into what they expect for Costco's future and the key factors driving their optimism.

Analyst Price Targets and Earnings Estimates

The average 12-month price target for Costco stock is $1,000, with a low estimate of $700 and a high estimate of $1,175. This average target reflects an upside potential of around 8% from the current stock price of $939.68. Analysts' earnings estimates for Costco are also bullish, with the average EPS estimate for fiscal 2025 at $18.48, up 11.59% from the historical EPS of $16.56. The average revenue estimate for fiscal 2025 is $278.09 billion, an increase of 9.29% from the historical revenue of $254.45 billion.

Key Factors Driving Analyst Optimism

1. Strong Business Performance: Costco reported year-over-year revenue growth of 7.5% in its fiscal 2025 first quarter, with profits jumping 13.2% year over year. This strong business performance has driven investor confidence in the company's stock.
2. Membership Renewal Rates: Costco's membership renewal rates have remained high, with a rate of 90.4% and an even more impressive rate of 92.8% for the U.S. and Canada. This indicates a strong customer base and recurring revenue.
3. E-commerce Growth: Costco's e-commerce sales rose 13% year over year in the first quarter, with a significant increase of 34.4% in December due to the later occurrence of Thanksgiving, Black Friday, and Cyber Monday. This growth in e-commerce sales has expanded Costco's reach and customer base.
4. Expansion and Growth Plans: Costco plans to increase its total warehouses to 916 during fiscal year 2025, indicating continued expansion and growth.



Analyst Ratings and Recommendations

Of the 38 analysts surveyed by LSEG, 13 recommended holding the stock, with one rating it underperform. The majority of analysts, however, maintain a bullish outlook on Costco, with 25 recommending a 'buy' rating. The average analyst rating for Costco stock from these 38 analysts is 'buy,' indicating a strong consensus on the stock's potential.

Conclusion

Wall Street analysts are bullish on Costco's future, with price targets and earnings estimates reflecting their optimism about the company's continued growth and strong performance. Key factors driving this optimism include Costco's strong business performance, high membership renewal rates, e-commerce growth, and expansion plans. While there may be risks and challenges ahead, Costco's proven business model, strong brand, and loyal customer base make it well-positioned to continue delivering impressive results. As an investor, it's essential to stay informed about Costco's performance and the broader economic environment, as changes in consumer spending habits, competition, and other external factors could impact the company's future stock performance.