Shares of Costco (COST) were in focus on Friday morning after an analyst at Gordon Haskett recommended investors accumulate shares following a "bullish" meeting with the company's chief financial officer. The upgrade comes a day after an analyst at Bernstein downgraded the stock, saying members could reevaluate their spending and membership fees as competitors get more aggressive.
GORDON HASKETT SAYS 'ACCUMULATE' COSTCO SHARES: Gordon Haskett analyst Chuck Grom upgraded Costco to Accumulate from Hold and raised his price target on the shares to $330 from $255 following a meeting with CFO Richard Galanti that he called "bullish." His most important meeting takeaway was that Costco is "finally going down the personalization journey" to engage more with its customers, Grom told investors in a research note Costco has 97.2M card holders and a very loyal customer base, giving it an "immense" opportunity to mine data to predict and drive future purchases, he said. He added that he also saw favorable results in recent survey work and thinks the company's fourth quarter earnings per share should beat consensus estimates "easily." Grom said he sees current levels as a reasonable entry point to get back together with "one of our favorite retail models."
Costco is expected to report Q4 results in early October.
BERNSTEIN SAYS MEMBERSHIPS COULD GO IN A DOWNTURN: Prior to Grom's upgrade, Bernstein analyst Brandon Fletcher downgraded Costco shares on Thursday to Underperform from Market Perform, telling investors in a research note of his own that he thinks valuation is too high and that investors have likely overestimated the company's growth potential. "Membership exhaustion" poses risks to the company's U.S. and international growth, Fletcher said. Although consumer spending is still strong, in a possible economic downturn, members are likely to rethink their spending and membership fees, he said, adding that "Potentially more aggressive competitor offerings in Convenience or Service...draw away members in new ways." Further, the analyst contended that investors may be putting too much emphasis on Costco’s international growth, and that he feels the company's growth in China "will go more slowly than most investors might expect."
Despite the downgrade, Bernstein's Fletcher raised his price target on the stock to $230 from $220.
PRICE ACTION: In morning trading, shares of Costco Wholesale are up fractionally to $288.45.
Costco
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