Costco shares to rally in 2017 as Trump's tax cuts will help its wealthy customers, Citi says

A customer pushes a cart of purchased items outside a Costco Wholesale Corp. store in Hackensack, New Jersey, U.S.
Ron Antonelli | Bloomberg | Getty Images

Citi Research raised its rating on Costco shares to buy from neutral, saying the retailer will benefit from President-elect Donald Trump's economic agenda and improving sales trends.

"We see a clear path to accelerating SSS [same-store sales] growth in FY17 via the abatement of headwinds from gasoline price deflation, food deflation and tobacco SKU reductions as well as the benefit from the new co-branded credit card and potential US tax changes that are likely to be particularly favorable for COST's affluent customer," analyst Kate McShane wrote in a note to clients Sunday.

"Given the stock's now-reasonable valuation, we are upgrading COST."