AP News

Ahead of the Bell: Costco Wholesale

NEW YORK (AP) — An analyst said Thursday that Costco should be able to continue its growth by tapping into small markets.

Deborah Weinswig of Citi Investment Research said in a client note that an analysis done with Fox Real Estate Advisory shows that the wholesale club operator could open 100 to 150 new clubs in the U.S. through 2020. The Issaquah, Wash., company currently has 439 U.S. clubs.

Weinswig says that with large market opportunities shrinking, heading into small markets is the right move for Costco to continue growing, as it currently only runs in 40 percent of the 136 U.S. small metro markets.

"Many of these markets could support one to two Costco clubs each, even with additional competitor locations," she wrote.

While Costco has a presence in all of the large U.S. metro markets except five, Weinswig says some of those markets that it is already in are underpenetrated or have significant population growth potential.

The analyst maintained a "Neutral" rating and $98 price target.

Costco finished at $101 per share on Wednesday. That is near their 52-week high of $103.51 per share set last Friday.

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