Analyst Note| Zain Akbari, CFA |
We plan to lift our $332 per share valuation of wide-moat Costco by a mid-single-digit percentage after it posted strong third-quarter (ended May 9) earnings. Its 21% revenue growth impressed considering the chain lapped the early days of the pandemic (which included significant customer stock-up activity), but we mostly attribute the results to transitory factors. So, our long-term forecast still calls for mid-single-digit percentage sales growth and 3%-4% adjusted operating margins. We suggest investors seek a more attractive entry price, particularly considering elevated uncertainty as the customer habits normalize.