Costco Stock Is Near Record Highs. Why It Could Keep Climbing.

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While many retailers have floundered in 2022 on fears that inflation will cut into consumers’ buying power,

Costco Wholesale

has flourished.

That’s no surprise, given that value-oriented stores resonate with shoppers even more keenly when they’re closely watching their budgets. Oppenheimer expects that trend to continue, rating the stock a buy even as it bumps up against record highs.

Analyst Rupesh Parikh reiterated an Outperform rating on

Costco

(ticker: COST) on Wednesday while raising his price target to $620 from $580. Costco shares edged up 0.8% to $574.74 in recent trading, just a few dollars shy of all-time highs. The stock has gained 1.3% year to date and more than 63% in the past 12 months, outperforming both the

S&P 500 and

Dow Jones Industrial Average

for both periods.

Parikh’s move follows his recent meetings with management, which left him more confident about the company’s outlook, both near and longer term.

“We believe the Costco business model remains extremely well-positioned for the current environment given a strong value proposition in a highly inflationary backdrop, a thriving fuel business, and reopening tailwinds in categories such as travel and apparel,” he writes.

The shares’ rise paused briefly despite strong earnings earlier this month, but have since rebounded. In addition, Costco remains a favorite among analysts. Nearly two-thirds of the 34 tracked by FactSet have a Buy rating or the equivalent on the shares, even with Costco trading for more than 41 times forward earnings.

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Bulls have argued that Costco deserves a premium because the retailer was a steady performer long before the pandemic, when it kicked into an even higher gear. With recurring revenue from memberships and high marks from consumers in terms of value, the company looks poised to continue benefiting this year, even as inflation and economic uncertainty cloud the overall picture for retail.

Write to Teresa Rivas at teresa.rivas@barrons.com