Costco’s stock fell 7.6% following the company’s second-quarter revenue miss and concerns over the impact of lower gasoline prices. Despite this, several brokerages increased their price targets for the membership-only retail chain, with Jefferies being the most bullish with a target of $905. Costco’s CFO attributed the decline in revenue to lower gasoline prices affecting total reported comp sales, as the average selling price per gallon was down compared to the previous year.
The pullback in demand for higher-margin goods like appliances and electronics has been a trend for Costco in recent quarters, amid cautious consumer spending in 2024. However, excluding fuel and currency fluctuations, comparable sales saw a 5.8% increase fueled by strong appliance sales and the retailer’s efforts to lower prices on select products. Analysts point to the retailer’s strong underlying same-store sales and ability to attract customers with lower prices as positive indicators of future growth.
Despite the stock’s decline, brokerages remain optimistic about Costco’s ability to drive revenue growth through solid demand, membership fees, and competitive pricing. Costco’s shares closed at $725.56, with a median price target of $780 according to LSEG data, as analysts believe the company is well-positioned to weather uncertainties in the retail environment and continue attracting customers with its value proposition.
