Wall Street analysts believe Costco risk/reward remains balanced

Citi analysts told investors in a note Friday that there was “nothing too concerning” in Costco’s (NASDAQ:) May sales data.

“May comps of +3.3% decelerated vs April +4.3%. Non-foods still weighed on results while Food and Sundries were +HSD and Fresh +MSD,” explained the analysts. “Food and Sundries and Fresh price inflation decelerated from April, and Fresh inflation is now in a +LSD range while Food and Sundries remain stickier in the +MSD-HSD range.”

The firm still believes COST is well-positioned to navigate these inflationary times, but trading at ~19x F24 EBITDA, they feel the risk/reward is balanced and, as a result, maintained a Neutral rating and $530 price target on the stock.

Analysts at Wells Fargo, who have an Equal Weight rating and $475 price target on Costco, said the retailer’s May sales reaccelerated following recent weakness.

“COST’s comp momentum reaccelerated in May, breaking its recent downward trend,” said the analysts. However, they too noted that “while encouraging, headwinds for the stock remain,” the risk/reward is balanced.