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Costco Shares are Poised to Generate Big Gains in 2020

costco shares

Costco (NYSE: COST) shares have been rallying at a sharp pace over the past three years amid improving financial numbers. The company has topped revenue and earnings estimates for the first quarter of fiscal 2020. In addition, it expects to sustain the financial and operational growth in the following quarters of this year.

Costco shares rallied 44% year to date, extending the three-year gains to 84%. Its stock price is currently trading close to an all-time high of $300. The company has also been rewarding investors with big cash returns. It currently offers a quarterly dividend of $0.65 per share. The company has raised the dividend in the past 15 consecutive years.

Costco Shares

Solid Q1 Results Strengthens Sentiments for Costco Shares Upside

Costco reported first-quarter revenue of $37 billion, up 5.6% from the past year period. The retailer generated comparable sales growth of 5.0% while e-commerce sales grew 5.5% from the same period last year.

In addition to sales growth, the company has been generating strong growth in earnings. Its first-quarter earnings per share came in at $1.90, up from $1.70 per share in the previous year quarter. Its cash position is also strengthening along with revenue and earnings growth.

Consequently, the company is well set to offer higher cash returns to investors in the coming days. Moreover, its strategy of reducing outstanding shares has been positively impacting earnings per share and dividends.

Analysts See Further Upside

Market pundits are optimistic about the upside potential. Gordon Haskett has lifted the price target to $330. The firm sees steady growth in financial numbers throughout 2020.

On the other hand, Oppenheimer sees double-digit earnings growth for 2020. The firm said, “We continue to remain quite upbeat on COST’s longer-term prospects and view the company as best positioned in the entire consumer staples/food retailing universe.” Overall, Costco shares are well set to extend the upside momentum in the following quarters.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.