Shares of Costco fell after Oppenheimer downgraded the stock to perform from outperform, citing record valuation.
"As we look forward, we now see less upside for shares driven by the now even more premium valuation, potentially aggressive Street forecasts, and difficult compares especially in Q2," said Oppenheimer analyst Rupesh Parikh in a note to clients.Tim Boyle | Getty Images News | Getty ImagesThe firm downgraded Costco's high-flying stock to perform from outperform. Shares of Costco ticked 1% lower in premarket trading on Wednesday.
Shares of Costco have surged more than 45% this year, outperforming the S&P 500 dramatically. Strong core gross margin performance and opening stores in China have contributed to this year's success; however, the retailer's valuation is now well above past peak levels, said Parikh. Costco shares trade at 34.5x next twelve month consensus earnings estimates and 18.5x next twelve months enterprise value/EBITDA. Parikh said these are valuations "well above prior peaks on both metrics."
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