With the COVID-19 pandemic intensifying across the country, the strong likelihood of consumers rebuilding their supplies of cleaning products and shelf stable food amid fears of fresh lockdowns puts the king of bulk in retail in the driver’s seat to have a big holiday season.
And for Costco (COST), that means its stock may come back into favor with investors headed into 2021.
“We believe the company is best positioned to benefit from strong consumer demand in a number of categories from paper products, food, consumer electronics, and home-related products during the holiday period. The attractive positioning to consumer trends coupled with a leading supply chain position suggests the potential for meaningful share gains,” said Oppenheimer analyst Rupesh Parikh in a new note to clients.
The analyst reiterated his outperform rating and $400 price target on Costco’s stock.
Costco shares currently traded at about $378.
Oddly, Costco shares are down roughly 3% from their 52-week high even as the broader S&P 500 has rallied to new records in recent weeks. But to Parikh’s point, Costco has done its part to justify further gains in its stock.
Costco’s October same-store sales surged 14.4% as club members continued their big weekly stock-ups during the pandemic. E-commerce sales rose a blistering 91%. Costco’s overall same-store sales have gained by mid to high double-digit percentages in the past five months, outpacing trends being seen at rivals Target and Walmart and hinting at market share gains pre-holiday.
The sales hot streak has sent sell-side analysts scrambling to lift their sales and profit forecasts on Costco over the next 12-months.
“We believe the company has seen strong holiday sales in October, as well as some stockpiling late in the month as a result of some more restrictive state measures, but also believe holiday strength could continue throughout the holiday season as consumers avoid malls and choose big-box formats for holiday shopping instead,” wrote Barclays analyst Karen Short in a recent note. Short has an overweight rating on Costco’s stock with a $400 price target.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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