Costco’s December Sales Were Stellar. What It Means for Investors.

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Shares of

Costco Wholesale

were flat on Thursday, even after the company said its December sales rose 16.2%, a hopeful sign for investors who are looking to make the most of the company’s expanding market share.

The stock (ticker: COST), which was up 0.1% to $550.50 on Thursday afternoon, saw sales of $22.24 billion in the five weeks ended Jan. 2, up from $19.14 billion in the same period last year.

Comparable sales, also known as same-store sales, or those from warehouses open for more than a year, rose 14.5%, across all its regions. U.S. comparable sales increased 15.9%. E-commerce sales rose 17.8% from the prior-year period.

Excluding gasoline prices and foreign exchange rates, comparable sales were up 11.5% company-wide. In the U.S., it rose 11.5%. Online sales rose 17.8% by the same measure.

Those results have bode well for the retail wholesaler among investors. Cowen analyst Oliver Chen wrote in a research note Thursday morning that

Costco

is one of the best-positioned retailers to win market share over the coming quarters during and after the pandemic. Chen rates the stock Outperform with a new price target of $630, from its previous $520.

Chen notes that the upsides to the stock include improvements and additional investments in e-commerce structures to better serve its customer base, strengthening gross margins and stronger comparable store sales growth thanks to its increasing market share.

Analysts at Jefferies are also optimistic about the stock, citing its potential profit outperformance as consumers add more to their carts and expand their shopping categories in stores.

“While valuation is high, we view COST as a compounder of value, with incremental sales translating directly into profit outperformance,” lead analyst Stephanie Wissink wrote in the note. She rates the stock Buy with a price target of $650.

Wissink also noted possible upsides to marketing, including higher membership, with a projection that membership increases 9%, and investments in the e-commerce business, which could encourage greater signups.

There are possible downsides, both analysts noted. These include continued social distancing due to Covid-19 variants, mounting costs from inflation, and losing market share to competitors like

Amazon.com

(AMZN), which also offers in-store grocery options and delivery.

Costco stock is up 50% in the past 12 months and up 38% in the past six months.

Write to Logan Moore at [email protected]