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'One of the Most Consistent Operators': Costco Upgraded to Buy at Deutsche Bank

Published 07/14/2022, 09:12 AM
Updated 07/14/2022, 09:22 AM
© Reuters.  'One of the Most Consistent Operators': Costco Upgraded to Buy at Deutsche Bank

By Senad Karaahmetovic

Deutsche Bank analyst Krisztina Katai upgraded Costco (NASDAQ:COST) to Buy from Hold with a new price target of $579, up from the prior $525.

Costco is seen as “one of the most consistent operators in our group,” hence the upgrade to Buy. The company’s “steady traffic gains and high membership renewal rates serve as key differentiators in an increasingly uncertain backdrop.”

Among other things, the analyst projects significant share gains for Costco “as consumers increasingly flock to warehouse clubs to consolidate trips, purchase in bulk for better pricing, and fill up their cars with lower priced gas.”

Moreover, the results for June show consumers "trade in" to the club channel. Costco is also seen to be in a better position than other retailers when it comes to high inventories.

“In addition, COST has a pristine balance sheet which the company uses to enhance shareholder value in many ways. Management has consistently returned cash to shareholders, including $1.7B through repurchases over the last five years. With a cash per share balance of $27 vs. $11 a decade ago, we believe COST is in a great position to return cash to shareholders through buybacks and special dividend,” Katai concluded in a research note.

COST shares are up 0.5% in preopen Thursday.

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