CNBC Pro

Costco upgraded by Oppenheimer, which says recent underperformance is a buying opportunity

Share
Boxes of shoes are stacked high for shoppers at a Costco store in Alhambra, California, on August 19, 2019.
Frederic J. Brown | AFP | Getty Images

Costco's recent underperformance is a good entry point into the stock, according to Oppenheimer.

The firm upgraded shares of Costco to outperform from perform and made the retailer a top pick. Oppenheimer also raised its price target on Costco to $335 per share from $300.

"We see the potential for a catch-up trade as investors could eventually rotate into laggards," Oppenheimer analyst Rupesh Parikh said in a note to clients Tuesday.

Shares of Costco have gained about 4% since the end of August, while the S&P 500 has rallied about 16% in the same period. Costco's relative price-to-earnings ratio, which compares current P/E ratio to past P/E ratios, has come down to 1.8x from a peak level of 2.07x in late August of 2019. Oppenheimer said Costco's more attractive valuation is a buying opportunity.

More In Pro News and Analysis

CNBC ProHere’s what to expect from banks when the Federal Reserve releases stress test results on Thursday
CNBC ProValue investor David Katz says this bank is a top pick after dip in financials
CNBC ProCNBC’s Halftime Report traders answer your questions on AMD, Wynn and Cleveland Hills