Costco Wholesale beat earnings estimates for its fiscal first quarter late Thursday, helped by e-commerce sales momentum. Costco stock edged up on Friday as analysts hiked price targets for the retail giant.
In a note to clients Friday, CFRA Research analyst Arun Sundaram wrote that a stock split is likely with Costco shares nearing $1,000. The last split came more than 20 years ago, he said. "Costco remains a top earnings compounder, but is also one of the most expensive" among consumer staples stocks, the analyst added. He maintained a hold rating but lifted the price target by $90 to $1,000 a share.
On Friday, more than a dozen analysts raised their 12-month price forecasts on Costco shares, FactSet shows. BMO Capital Markets came in highest, at 1,175 with a buy rating.
This Leaderboard stock has been meeting resistance at the $1,000 level, but finding support at the 21-day exponential moving average, the IBD markets team noted after Costco's Q1 beat.
Costco Earnings, Sales Accelerate
For the three months ended Nov. 24, Costco delivered EPS of $4.04 a share, up 13% vs. a year earlier. The company posted revenue of $62.151 billion, up about 8%. Analysts had projected that the club membership retailer would earn $3.79 per share on revenue of $62.176 billion, FactSet shows.
Growth picked on the top and bottom lines.
For Q1, same-store sales rose 7.1% and membership fee income rose 7.8%, both above views. Traffic rose 5.1% worldwide and 4.9% in the U.S.
E-commerce sales grew 13% vs. a year ago. Top Q1 digital sales categories included gold and jewelry, hardware and gift cards, all of which grew double digits, the company said in an earnings presentation.
However, e-commerce growth slowed from a 19.5% gain in the prior fourth quarter.
Costco raised its basic annual membership fee on Sept. 1 for the first time since 2017, to $65 from $60. The warehouse club expects most of the benefit from the hike to come in 2025-2026.
Costco, Walmart Outlook
The Costco earnings report follows a reassuring holiday outlook from Walmart in November. On an earnings call Thursay, Costco CFO Gary Millerchip said customers remain selective about purchases. However, they are willing to spend, if they find a "combination of newness of items, quality and value" as inflation comes down.
After the Q1 report, analysts expect Costco earnings of $18.05 per share for the full year ending in August 2025, a 9% increase. That view is up from a 7.8% increase before the report.
Costco Stock Eyes $1,000; COST Split Ahead?
In stock market action on Friday, Costco stock gained 0.4%, near 989. Shares pegged an all-time high, above 1,007, on Wednesday. The retailer is extended from a September breakout past 923.83, meaning shares are no longer in buy range.
The relative strength line for COST stock is near highs as well.
Costco, Walmart Turned Into Major Inflation Winners
Investors are watching the impact of lingering inflation on consumers. The retail sector could be especially vulnerable to inflationary impact from incoming President Donald Trump's tariff policies.
But both Costco and Walmart, major discount retailers, turned into inflation winners. As consumers hunted for value, they seemed to favor Costco and Walmart over Target.
Further, both Walmart and Costco are growing e-commerce sales at a faster clip than Amazon.com, though their e-commerce businesses are far smaller.
Shares of Walmart fell on Friday. Target and Amazon rose.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
