Club names Costco and Amazon each rose more than 1% on Tuesday on positive analyst reports. Here’s what the Street had to say plus our reaction. Costco COST YTD mountain COST stock performance year to date. The news: Wall Street firm Stifel on Tuesday increased its price target on Costco shares to $900 from $850 and maintained a buy rating. An analysis of U.S. scanner data showed that Costco, Amazon and Walmart accounted for the greatest share gains in the U.S. grocery market. Since 2019, Club holdings Costco and Amazon have gained the most share, driving 23% of growth in the category despite only making up for 12% of grocery sales. The growth has allowed all three retailers to get “more favorable economics” from staples companies, including lower prices and and exclusive products. Stifel also highlighted Costco’s strong private label offerings, growing share of gas purchases and a favorable shopping experience as key factors to further boost its market share in grocery sales. Club take: Costco is a best-in-class retailer that caters to consumers across income brackets that are seeking better deals. The warehouse retailer is known for its huge warehouses — it continues to open new stores in the U.S. and overseas — but it also has a big opportunity to grow its e-commerce business. Costco shares have outpaced the broader market in 2024, gaining roughly 30% compared to the S & P 500’s 23% gain. The stock is up 1.4% Tuesday. We maintain our 2 rating on the stock, meaning we’d buy more on a pullback, and a price target of $875. Amazon AMZN YTD mountain AMZN year to date stock performance. The news: Mizuho on Monday published its quarterly survey of companies using Amazon Web Services (AWS), which showed demand for Amazon’s cloud services is rising, with many companies paying upfront to switch from their current providers to AWS sooner. Other customers said they’re spending more money toward infrastructure products like servers and storage. In addition, generative AI projects are only about six months away from commercial deployment. Once these AI models up, the analysts expect the “consumption multiplier effect to kick in as inferencing activity should accelerate meaningfully given the large base of external customers.” Mizuho retiterated Amazon as a top pick with a price target of $240. Club take: This new survey shows AWS is a preferred cloud provider in a highly competitive landscape. Amazon has been able to rally to record highs because its three core businesses, including AWS, are firing on all cylinders. AWS revenues are accelerating thanks to AI, profitability in e-commerce is improving through a reduction in cost to serve, and the advertising opportunity is increasing from Prime Video usage. Amazon Tuesday reached a new high of $199.88. Shares are up 30% year to date. We currently have a 2 rating on Amazon shares with a price target of $400. (Jim Cramer’s Charitable Trust is long COST and AMZN. See here for a full list of the stocks.)…
Read More: Two analyst notes are boosting the Costco and Amazon — here’s why