Things are looking up for Costco Wholesale Corporation (NASDAQ:COST), and the company is going to reward shareholders as a result. That’s the assessment of Wells Fargo, which has just upgraded the warehouse giant while increasing its price target.
CNBC passes along the firm’s take on Costco.
Costco shares will thrive this year due to larger than expected capital return to shareholders, according to one Wall Street firm.
Wells Fargo raised its rating for Costco shares to outperform from market perform, citing the company’s financial benefits from tax reform.
Analyst Edward Kelly has boosted his price target for Costco to $220 from $195, as he expects “the company to sustain strong comp momentum.” He’s also offered up a prediction that the company will be awarding shareholders in the near future with a special dividend.
“While the most recent dividend was paid in May of last year, we believe there is potential for the company to accelerate this timeline given our estimate of a 14% FCF [free cash flow] benefit from tax reform and the company’s strong underlying cash flow,” Kelly wrote.
Costco Wholesale Corporation shares rose $2.59 (+1.37%) in premarket trading Monday. Year-to-date, COST has gained 3.17%, versus a 0.52% rise in the benchmark S&P 500 index during the same period.