On Friday, Loop Capital, a financial services firm, increased its price target for Costco Wholesale (NASDAQ:COST) to $1,095 from the previous $1,005 while maintaining a Buy rating on the stock. The stock, currently trading near its 52-week high of $1,007.80, has delivered an impressive 50.61% return year-to-date.
According to InvestingPro analysis, the stock appears to be trading above its Fair Value, with a P/E ratio of 59.65. The revision follows Costco's first-quarter earnings report, which revealed an earnings per share (EPS) of $4.04, surpassing the consensus estimate by $0.25. This beat included a one-time tax benefit that contributed $0.22 to the EPS.
InvestingPro data shows that 8 analysts have revised their earnings upward for the upcoming period, suggesting continued optimism about the company's performance.
Costco's sales for the quarter grew by 8% based on retail sales and membership fee income (MFI). The EPS growth of 13% reflected not only the sales and gross margin growth but also the tax benefit. Loop Capital pointed out that the frequency of these so-called one-time tax benefits has been such that they are becoming a regular occurrence in Costco's financial reports.
Excluding the tax benefits, Costco's EPS growth would have still exceeded consensus estimates by $0.03. The company's performance has been strong, with traffic driving value that continues to attract customers to its clubs. Loop Capital's projection for Costco's fiscal year 2025 EPS stands at $19.80, which is $1.94 higher than the consensus estimate.
The analyst from Loop Capital emphasized the rationale behind the upgraded price target, attributing it to a discounted net operating profit after tax (NOPAT) model that was adjusted after reviewing the company's recent earnings. The firm remains bullish on Costco, citing the retailer's ability to offer outsized value to its members.
With a market capitalization of $440.72B and an overall financial health score rated as "GREAT" by InvestingPro, Costco continues to demonstrate strong fundamentals despite its premium valuation.
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