CNBC’s Jim Cramer likes Costco stock despite its high valuation and suggests it has more room to run. “I feel very good about Costco,” Cramer said Thursday on “Squawk on the Street” after the wholesaler delivered a solid April sales report. “I know the price is very high, but they’re such a bargain.” According to FactSet, Costco is trading at a forward price-to-earnings ratio of 44.8 – above the five-year average of 35.9 and the industry. Cramer said the P/E ratio is not a cause for concern without delay as he believes the stock can rise. He identified that investors still expect a rise in membership fees sooner or later. It is historically overdue. This is the second catalyst for the stock that CNBC Investing Club has been waiting for. The other, a long-awaited special dividend, was declared last 12 months. However, Wells Fargo said it was “difficult to get behind the valuation” as shares had reached near all-time highs, creating an “unattractive risk-reward ratio.” Wells Fargo analysts maintained their $750 price goal and reiterated their Equal Weight Hold Equivalent rating. COST 1Y Mountain COST stock 1-year performance. Costco shares rose nearly 1.5% after its monthly sales report Wednesday evening showed core comparable sales, which exclude gas and currency fluctuations, rose 5.5% last month. Although below Street estimates of 6.2%, core values were still quite strong considering the negative impact of a difficult month-on-month comparison as a consequence of this 12 months’s shift within the Easter calendar. The stock has been making a comeback of late, surging greater than 7.5% after earnings on March 8 – the session after the corporate’s sales failed to fulfill the high bar. However, the recent string of solid gains on five out of six days has left the stock lower than 2% off its March 7 all-time high of $787. Costco is up 17% in 2024, outpacing the S&P 500’s 9% year-to-date rise and the patron staples sector’s 7.5% rise over the identical period. The consumer staples industry index hit a multi-year high on Thursday. Costco’s non-food division rose mid-single digits in April, compared with a low double digits the previous month – led by high demand for gold bullion. There was a premium at Gold, but not at Costco, and that has attracted a brand new cohort of consumers, Cramer said in the course of the club’s morning meeting Thursday. Cramer appreciates Costco’s retail leadership in low prices and value in an emerging weaker spending cycle. “They are what the Fed needs more than anything else in the world,” he said. “A company that goes to suppliers and says, ‘No, we’re not taking that price.’ They lower that price.” Wall Street analysts also reacted mostly positively to Costco’s April sales, with JPMorgan raising its price goal for the raised shares to $804 per share from $761 and maintained a “buy equivalent” chubby rating. Analysts at Goldman Sachs increased their price goal. Costco’s price goal rises from $830 to $840. The Club currently has a 2 rating on Costco shares and an $800 price goal is anticipated to be announced after the closing bell on Thursday, May 30.
Friday, November 29, 2024
