CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows:
We lift our 12-month target to $659 from $577, 42x our FY 24 (Aug.) EPS of $15.68 (up from $15.60; FY 25 up to $17.07 from $16.97) vs. 36x five-year average forward P/E. F1Q EPS of $3.58 (+17%) beat by $0.15 on comp sales growth (ex-fuel and FX) of 3.9% (+4.7% traffic; -1.6% average transaction amount). Membership growth continued as COST ended F1Q with 72.0M paid households (+7.6% Y/Y) and 33.2M Executive members (+0.9M Q/Q). The renewal rate was 92.8% in the U.S. and Canada, up 10 bps Q/Q. Inflation averaged 1%-2% in the quarter but trended toward 0%-1% as the quarter ended. In our view, these are the ingredients needed to support a membership fee hike, which is past due based on historic trends (usually every 5.5 years). COST did, however, announce a special dividend ($15/share; 5th one in 11 years), which will be paid ($6.7B) on 1/12/24 to shareholders of record on 12/28/23. Strong membership trends, margin expansion, and EPS growth should support COST’s rich valuation over the next year. We keep a Hold.