Why Costco Stock Is Still a Buy After a Q4 Revenue Miss

Costco Wholesale (COST) stock is trading lower Friday after the membership warehouse club topped earnings estimates for its fiscal fourth quarter, but came up just short of revenue expectations.

In the 16 weeks ended September 1, Costco's revenue increased 1% year over year to $79.7 billion, driven by 5.4% same-store sales growth. Its earnings per share (EPS) were up 8.8% from the year-ago period to $5.29.

"We ended Q4 with 76.2 million paid household members, up 7.3% versus last year and 136.8 million cardholders, up 7% year over year," said Costco Chief Financial Officer Gary Millerchip on the company's conference call. "About half of new member signups in fiscal year 2024 were under 40 years of age. This percentage has been growing since COVID and has lowered the average age of our members over the last few years." 

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Millerchip added that Costco ended the quarter with 35.4 million paid executive memberships, up 9.6% on a year-over-year basis.

The results were mixed compared with analysts' expectations. Wall Street was anticipating revenue of $79.9 billion and earnings of $5.08 per share, according to Barron's. Costco's same-store sales growth also came up short of the 5.7% increase analysts forecasted.

"We are encouraged by our momentum exiting fiscal year 2024 and are excited about the growth opportunities ahead as we continue to execute our strategy of delivering exciting new items and greater value for members, innovating with Kirkland Signature, and growing our warehouse footprint and digital capabilities globally," Millerchip said.

Is Costco stock a buy, sell or hold?

Costco Wholesale has turned in a strong performance on the price charts this year, up 37% on a total return basis (price change plus dividends) vs the S&P 500's 22% gain. Unsurprisingly, Wall Street is bullish on the consumer staples stock. 

According to S&P Global Market Intelligence, the consensus analyst target price for COST stock is $921.14, representing implied upside of roughly 4% to current levels. Meanwhile, the consensus recommendation is a Buy.

Financial services firm Oppenheimer is one of the more bullish outfits on the large-cap stock with an Outperform rating (equivalent to a Buy) and $955 price target.

"We look very favorably upon COST's long-term prospects," said Oppenheimer analyst Rupesh Parikh in a note following the earnings release. He went on to provide several reasons for the firm's upbeat outlook toward Costco, including the company's unique and improving consumer value proposition, open-ended worldwide growth prospects, and its leading competitive position that could drive share gains.

Oppenheimer's $955 price target represents implied upside of more than 7% to current levels. 

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