Costco stock cut to market perform at Wells Fargo on headwinds


Wells Fargo analyst Edward Kelly on Monday cut his rating on Costco Wholesale Corp. COST, +0.02% to equal weight from overweight and reduced the retailing giant’s price target to $490 a share from $600 a share. “COST remains a high-quality name, but we see a number of hurdles in the path of this rich multiple stock moving forward,” Kelly said. Risks include slower price increases in food, weakening consumer spending and an eventual pullback in fuel margins, as well as currency exposure. “We see more risk to consensus estimates going forward than upside potential, not a good set-up for this name given its valuation,” Kelly said. A potential hike in membership fees and a special dividend in 2023 provide some support for the stock, but “both seem anticipated at this point,” he said. Shares of Costco fell 1.6% in premarket trades. The stock is down 14.3% in 2022, compared to a 20.9% loss by the S&P 500 SPX, +1.36%.

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