Bank of America Cuts Costco's Price Target Amid Margin Pressure
Costco Wholesale Corporation (NASDAQ:COST) is facing margin pressure due to rising supply chain costs, prompting Bank of America Corp (NYSE:BAC) to cut its price target for the stock from $1,200 to $1,095. Despite this adjustment, BofA maintains a 'Buy' rating on Costco's shares. The broker forecasts fourth-quarter adjusted earnings per share at $6.52 versus an expected consensus of $6.55 and anticipates 11.3% sales growth but also expects a slight decline in gross margin by 10 basis points. BofA’s revised valuation multiple for Costco is now 48 times estimated FY2027 earnings, down from 53 times previously, reflecting increased caution around margins. However, the broker remains optimistic about Costco's market share gains and membership growth potential in the coming quarters due to its value strategy and strong customer base. The firm also notes that Costco could benefit from fourth-quarter tariff refunds, which may help maintain competitive pricing. Additionally, BofA anticipates a possible special dividend announcement supported by projected cash reserves of $20.4 billion.
