Things weren’t all cupcakes and rainbows in the financial results that Costco Wholesale Corporation (NASDAQ: COST) reported last night.
The retail giant came in slightly shy of estimates for revenue, membership fee, and overall comparable sales in its fiscal Q4, leading to a 2.0% decline in its share price on Friday.
Still, famed investor Jim Cramer says there wasn’t anything particularly concerning in the company’s quarterly release.
If anything, the report increased his conviction in Costco stock that he now expects is headed for $950.
Cramer’s new price target indicates potential for a near 7.0% gain from here.
Costco is not an inexpensive stock to own
Jim Cramer remains constructive on Costco Wholesale as the miss on revenue was rather insignificant and recommends focusing instead on the meaningful increase in gross margin that delivered a beat on earnings.
The recent jobs data has escalated fears of an economic slowdown ahead – but the Washington based company has a history of doing well against such a backdrop and will likely uphold its legacy moving forward, as per the Mad Money host.
Costco is globally the best-run retailer that continues to be the store of choice for price-conscious consumers, he told members of his investing club on Friday.
Cramer agreed that Costco stock is not inexpensive at the moment but said a 0.52% dividend yield makes up for another good reason to still have it in your portfolio.
Recent price hike will help Costco stock
Former hedge fund manager Jim Cramer recommends owning Costco stock also because its chief of finance, Gary Millerchip, said the price hike the company implemented earlier this month will take a couple quarters before reflecting in financials.
“The vast majority of benefit will come in the back half of 2025 and into the fiscal year 2026,” he told investors and analysts on the earnings call.
Additionally, nearly 50% of those who subscribed to a Costco membership in fiscal 2024 were aged 40 or less.
That’s significant since signing up younger members creates an opportunity for the retailer to keep them loyal for years.
All in all, Cramer is bullish as he’s convinced that consumers will continue to choose Costco for value and investors will continue to reward its shares with a higher multiple due to solid customer loyalty.
His optimism is widely shared by the Wall Street analysts as well.
The highest price target on Costco shares is $1,050 at writing that translates to about an 18% upside from here.
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