Oppenheimer removes Costco from Top Pick status on risk of aggressive estimates By Investing.com

By Senad Karaahmetovic 

Shares of Costco (NASDAQ:) are set to open lower today after the company below-consensus sales for November.

Costco posted total comparable sales of +4.3%, a material miss relative to the consensus of +7.7%. U.S. comparable sales, excluding fuel and currencies, rose 5.3%, again below the expected growth of 8.6%.

Overall, net sales rose 5.7% to $19.17 billion year-over-year.

Oppenheimer analysts reiterated their view that Street forecasts are aggressive. Following yesterday’s business update, they now expect “an even more material reset in consensus forecasts.”

“In recent weeks, we have observed additional price reductions on CE products and new promotions to drive big-ticket purchases. These appear to not be sufficient to offset difficult multi-year compares. As we await a full reset of Street figures, and given potentially lingering big ticket headwinds, we are removing COST from top pick status. For longer-term players, we would continue to take advantage of dips in COST shares,” they said in a note.

Evercore ISI analysts said the November sales results show even Costco is not immune to a slowdown. Still, they remain positive on the COST stock as the firm’s “loyalty driven model should continue to differentiate amidst an inflationary backdrop.”

“Costco’s 3-year comps may be decelerating, but they remain amongst the best in the retail industry: 14.7% domestic 3-year traffic growth remains indicative of Costco’s strong value positioning in a compressing macroeconomic environment. We see two definable catalysts in a likely CY23 (perhaps late spring) fee increase, and a potential special dividend to follow thereafter. COST remains a core large cap growth holding for a slowing retail world,” they wrote.