Bernstein says COST is a buy for its ‘underappreciated’ growth potential
Bernstein is bullish on Costco due to its overlooked focus on international growth. Analyst Zhihan Ma initiated coverage with an outperform rating on the Washington-based company. Ma set a $1,016 price target, which implies shares can add 14.6% over Monday’s close. “Despite its expensive valuation, we believe its international growth potential is underappreciated, which can support consistent earnings growth for decades to come,” Ma told clients in a Monday note, in which she also called Costco the “highest quality company in our coverage.” Costco trades at nearly 50 times forward earnings, according to FactSet. That’s well above the S & P 500’s 24 multiple. That said, the analyst noted the company should see at least half a century on its growth runway, powered in the medium- to long-term by opportunities outside the U.S. Discounted cash flow through 2080 shows an upside of approximately 20%, Ma said, which highlights the value of Costco’s earnings power. As the consumer gets increasingly choosy , Ma said Costco is also a preferable play because of its focus on value. Ma’s call comes amid a strong year for shares, with the stock up more than 34% in 2024. Like her, the majority of analysts polled by LSEG have buy ratings on Costco.
