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.
