1 Wall Street Analyst Thinks Costco Is Going to $1,016. Is it a Buy?

Costco Wholesale (NASDAQ: COST) has been one of the best-performing retail stocks of all time. It's also one of the biggest retailers in the world today, with a market cap of roughly $400 billion and annual revenue above $250 billion.

Costco enjoys tremendous competitive advantages in its industry, thanks to its membership model and reputation for stocking high-quality bulk goods for its members. That's enabled the company to deliver steady growth, even when much of the industry is struggling.

Now one analyst sees Costco making another move.

Image source: Getty Images.

Is Costco's stock price headed to $1,016?

Bernstein just initiated coverage on Costco with an outperform rating and a price target of $1,016, implying a nearly 14% upside for the retail stock over the next 12 months or so. The research firm sees the international market as a key growth opportunity, as the vast majority of Costco's revenue still comes from North America.

Still, the company is gaining in markets like China and Europe.

Is Costco stock a buy?

Costco's business looks virtually flawless at this point, but the stock is now priced at a premium at a price-to-earnings ratio of 54. This is close to the most expensive it's been in the retailer's history.

Meanwhile, now that inflation is cooling off, Costco is losing its ability to pass along price increases and juice revenue growth. It also recently raised its basic membership fee to $65 a year and issued a special dividend at the end of 2023, which are two triggers investors track for the stock to take another leg up.

While there's still room for Costco to expand in North America and internationally, and the company is opening new stores, the upside potential is limited by its valuation. The stock should eventually get to $1,016, but it may take longer than Bernstein's report would suggest.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.