Ananya Mariam Rajesh
(Reuters) – Costco shares fell 7.6% on Friday, their worst day since May 2022, after the members-only retailer missed second-quarter earnings expectations and signaled a headwind. reduction in gasoline prices.
However, at least seven brokerages raised their price target on Costco (NASDAQ:), with Jefferies raising its top price to $905 after the retailer’s second-quarter revenue rose 6% to $58.44 billion but fell short to LSEG estimates of $59.16 billion.
“Gasoline price deflation has negatively impacted overall reported sales…the average global sales price per gallon of gas is down approximately 3.5% year-over-year,” said outgoing Costco CFO Richard Gallanti.
“The stock has just had very strong earnings growth, and we see that a lot with Costco, where … the stock sells off on financial news and then recovers within a few weeks or so,” Telsey Advisory Group analyst Joseph Feldman said.
Over the past few quarters, Costco has seen demand decline for high-margin items such as appliances, home decor and electronics. U.S. retail sales fell the most in 10 months in January as shoppers remained cautious ahead of 2024.
Still, like-for-like sales, excluding fluctuations in fuel prices and foreign exchange rates, rose 5.8%, helped by strong sales of appliances and the retailer’s efforts to cut prices on select products, which attracted consumers willing to shop on penny prices.
“Their underlying same-store sales are very strong, they get very good store traffic, and that’s the biggest sign of a retailer’s health,” Feldman added.
Brokers believe the retailer can attract customers amid uncertainty and drive revenue growth through strong demand, membership fees and lower prices.
Costco shares closed at $725.56 with a median price target of $780, according to LSEG.