Costco Holiday Blowout Signals Strong Stock Recovery Ahead: Analyst

Costco Wholesale Corporation (NASDAQ:COST) stock rose Thursday following strong monthly sales data. The retailer continues to show steady demand across both U.S. and international markets. JP Morgan analyst Christopher Horvers reiterated the Overweight rating on Costco, with a price forecast of $1000. Horvers said Costco Wholesale continues to gain market share across categories while traffic trends keep improving. He said comparable sales should accelerate as easier comparisons and stimulus spending support valuation expansion. The analyst noted Costco operates mostly in staples, with consumables representing about 70% of its total product mix. He said the company benefits from long-term global store expansion and a recurring revenue model supported by high membership renewal rates. Horvers added membership fees generate roughly half of operating profit, giving Costco strong pricing power and margin flexibility. He said rising e-commerce profitability and growing advertising revenue also support potential margin expansion. The analyst pointed to U.S. core comparable sales rising 6.3% in December, well above consensus and internal expectations. Horvers said U.S. traffic grew 2.4% while total enterprise traffic increased 2.7% year over year. He added average ticket rose 3.4% excluding gas price deflation and foreign exchange impacts. Horvers said Canada posted a 6.0% core comp, matching expectations, while international regions slightly exceeded forecasts. He said comps excluding gas and currency effects reached 6.9%, reflecting strong underlying demand. Midwest, Northwest, and Southeast regions led U.S. performance during the period. He said Australia, Japan, and Korea drove international strength. According to the analyst, weather hurt some Northeast demand in December, though comparisons versus BJ's were less negative. He added store cannibalization pressures eased to 50 basis points from 60 in previous months. Horvers noted December sales momentum reinforced his view that Costco continues to outperform retail peers. Strong November and December results suggest Costco once again "won the holidays," supporting expectations for continued upside as year-over-year comparisons ease in the months ahead. He said easing comparisons should support further sales growth as seasonal pressures fade. Horvers added expected spring tax stimulus should further boost Costco's already strong demand profile. He said extended shopping hours for Executive members continue to drive higher visit frequency and spending. Horvers noted Executive sign-ups rose to 80,000 per week, up from 70,000 during the prior quarter. He said higher Executive membership contributed to roughly 5% growth in membership fee income this quarter. COST Price Action: Costco Wholesale shares were up 5.05% at $927.11 at the time of publication on Thursday, according to Benzinga Pro data. Image by Tada Images via Shutterstock