Costco Wholesale (COST) is expected to deliver a strong fiscal Q3 update and ease investor concerns across key debate areas, reinforcing the bull case for the stock despite a tougher consumer and fuel price environment, UBS Securities said.
"COST's 3Q print should provide more data points supporting the bull case on shares," the investment firm said in a Tuesday research note, adding the retailer is well-positioned to ease investor concerns around comps, renewals, membership growth, margins and fuel price pressures.
UBS said investors will focus on renewal rates, membership growth and margins, noting Costco has multiple growth drivers including new products, e-commerce, warehouse expansion and retail media.
"We think the company will continue to steadily win market share in the near-term," according to the note.
The brokerage also expects Costco's top-line momentum to remain strong in fiscal Q3, estimating net sales growth of 11.3% and a total company comp of 9.2% including fuel and foreign exchange. The brokerage said membership growth, higher executive membership penetration, traffic gains and new store openings are likely supporting performance.
UBS maintained its buy rating on the stock and raised its price target to $1,275 from $1,205.
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