Photo by Henry & Co. on Unsplash
 

• Costco reported better-than-expected results for its fiscal Q4.
• Its shares are still down on a 26 bps hit to the core gross margin.
• Oppenheimer analyst says Costco shares have an upside to $550.

Costco Wholesale Corporation (Nasdaq: COST) opened about 5.0% down on Friday even though the big box retailer reported better-than-expected profit for its fiscal fourth quarter.
 

Are Costco shares worth buying here?

The stock is down primarily on the core gross margin that lost 26 basis points, suggesting the Issaquah-headquartered company failed to pass on “all” inflation.

Still, Rupesh Parikh (Oppenheimer analyst) recommends that you buy Costco shares on the weakness after the retail news as they have an upside to $550 a share.

COST shares have historically struggled on prints. We would take advantage of any weakness and amidst a likely ongoing volatile trade.

He’s convinced the retail chain will eventually hike its membership prices, which will be a meaningful catalyst for the stock.
 

Costco Q4 earnings snapshot

Net income printed at $1.87 billion versus the year-ago $1.67 billion

EPS climbed from $3.76 to $4.20 as per the earnings press release

Net sales jumped 15% on a year-over-year basis to $70.80 billion

The consensus was $4.17 a share of EPS on $70.80 billion in revenue

Same-store sales up 13.7% were in line with the Street expectations
 

Annual sales hit a record high

Annual sales climbed 16% to top $200 billion for the first time. Costco reiterated its commitment to keeping the price of its hot dog and soda combo unchanged. CFO Richard Galanti said:

There are some businesses that are doing well with margin, like the gas business, in a smaller way, in the travel business, those things help us be more aggressive in other areas or hold the price on the hot dog and the soda a little longer – forever.

Wall Street has a consensus “overweight” rating on Costco shares as well.

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