Costco sets the stage for a strong second half to fiscal 2023

Fed to skip hike in June, hop into long pause before jump to cuts: Morgan Stanley

Costco sets the stage for a strong second half to fiscal 2023 - Northcoast Research

Published Mar 08, 2023 00:38

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By Sam Boughedda

Costco (NASDAQ:COST) lifted to Buy from Neutral with a $560 price target by Northcoast Research analysts on Tuesday.

The analysts told investors in a research note that Costco's performance in its fiscal second quarter "exceeded expectations" and set the stage for a strong second semester of fiscal 2023 despite the challenges of high inflation and the reluctance of many consumers to purchase discretionary merchandise.

As a result, they believe 2023 will set this retailer up for another stage of overall market share gains.

"Costco has been here before. At these times, its strong value proposition in consumables — from food to pharmacy and HBC to household supplies to gasoline — not only allows it to retain its many loyal members but attract new ones," analysts wrote.

In addition, the analysts said Costco's "impeccable balance sheet" gives them confidence that a special dividend of at least $10 per share, as well as more, and possibly aggressive, share repurchases, will occur during the next 12 to 24 months.

"Both of these add to the attractiveness of the Costco stock. We think a membership fee increase is also likely in that timeframe but is not in our EPS forecast," they added.

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