Costco Wholesale ‘s (COST) soft March sales and subsequent drop in its stock price late last week offer an opportunity to buy shares of the retailer on weakness, according to Wall Street analysts — a view we share. Costco late Wednesday said overall same-store sales fell 1.1% in March , with members of the wholesaler cutting back on discretionary items like home furnishings and jewelry. The decline in sales, which may also have been impacted by unfavorable seasonal weather in California, sent shares tumbling the next day by nearly 3%. The stock has since recovered most of those losses, but is still down about 0.7% from its closing price on Wednesday, settling at $493.83 a share on Monday. But now is the time to “buy the March noise,” analysts at JPMorgan wrote in a research note Monday. “We see this disappointment as an opportunity to buy a global growth staples asset with COST a rare combination of best in sector operator in one of the best sectors in all of retail,” they added. JPMorgan predicted core comparable sales in the U.S. would climb by up to to 5% in April, compared with a 1.5% decline last month. Separately, analysts at TD Cowen see the decline in Costco’s stock as “an opportunity to buy.” In a research note Monday, they highlighted the retailer’s solid traffic trends, ongoing strong demand for food and a catalyst from a potential special dividend as reasons why the company remains a top pick for 2023. With a membership-only model that delivers competitive prices, TD Cowen analysts argued, “COST provides an inflation solution that may partially offset softness in big ticket discretionary items.” The Club’s take “Costco is a company that says business as usual. The good thing is, business as usual means don’t sell it,” Jim Cramer said Monday. “If you see the number as is, and you sell here, you’re probably going to not catch what could be a nice pivot,” he added. More broadly, we’re encouraged to see analyst optimism around Costco, despite last month’s decline in sales. And we’re not worried about the slower month. Costco has the flexibility to switch up its inventory and bring in items that sell better in the spring, eliminating the seasonal headwind. We’re also mindful that, while the timing is uncertain, a membership-fee increase and special dividend hike are two potential catalysts on the horizon. Overall, we remain confident that the Club holding is the perfect retailer to own in a slower economy, given its ability to offer the most competitive prices to its members. It also should see profit margins supported by softer costs for freight, trucking and chemicals. (Jim Cramer’s Charitable Trust is long COST. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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Costco Wholesale‘s (COST) soft March sales and subsequent drop in its stock price late last week offer an opportunity to buy shares of the retailer on weakness, according to Wall Street analysts — a view we share.
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