Costco on Thursday evening reported a solid quarter, beating on both the top and bottom lines. The warehouse club is clearly taking share from other retailers due to its focus on newness, quality, and value. With gross margins and paid memberships trending higher, this rally to fresh highs can continue. Total revenue in its first quarter of fiscal year 2025 totaled $62.15 billion, beating analysts’ expectations of $62.08 billion, according to estimates compiled by LSEG. Earnings per share in the period increased nearly 13% year over year to $4.04, topping analysts’ forecasts of $3.79, LSEG data showed. EPS included a 22-cent per share benefit related to stock-based compensation. But even after removing the benefit, the bottom-line results were still better than expected. Costco Why we own it: Costco is the best-run retailer in the world, with a business model focused on offering its members a relatively small universe of products at hard-to-beat prices. Costco has succeeded for decades, but the high inflation of recent years has made the company’s value-focused ethos really shine. Competitors: BJ’s Wholesale , Walmart , fellow Club holding Amazon Last buy: June 15, 2020 Initiation date: Jan. 27, 2020 Bottom line Shares of Costco edged slightly lower in extended trading Thursday. But that’s how the stock usually trades in reaction to earnings. Since the company reports sales every month, a lot of the upside already gets priced in. Down reactions to earnings haven’t been a negative driver of sentiment, though. The stock made a closing high Wednesday of $994.69 and is up nearly 50% year to date. Costco shares are not cheap by traditional standards, trading at around 54 times next-12-months EPS estimates. The lofty valuation, however, hasn’t stopped the stock’s monstrous rise over the years. The stock is deserving of its hefty premium due to the company’s share gains and dependability with a subscription model. COST YTD mountain Costco YTD We also liked hearing that Costco completed its first targeted media campaign in the quarter. The company understands retail media is a huge opportunity to generate advertising revenue and boost profits. Walmart and Club name Amazon have proved that e-commerce advertising revenue can be big business. Like always, we’d anticipate those profit dollars at Costco would be reinvested in the business to create more value for shoppers. In turn, this will lead to more share gains in the future. We think Costco stock can continue to work in this market, with the company increasing its warehouse footprint, gaining new members, and expanding gross margins. With all three delivered in the quarter, we are increasing our price target to $1,100 per share from $950. That represents more than 11% upside from Thursday’s close. Commentary Total comparable sales increased 5.2% in the quarter, driven by a 5.1% increase in traffic, or shopping frequency, and a 0.1% increase in ticket. The traffic gains tell us that more customers…
Read More: Costco quarter signals record stock run is not done. Here is our new price