Jim Cramer: Costco has room to run despite a rich valuation and shares nearing all-time highs

Published Thu, May 9 202412:07 PM EDTUpdated Thu, May 9 202412:15 PM EDT

CNBC's Jim Cramer likes Costco stock despite its high valuation and suggests it has more room to run. "I feel very comfortable" about Costco, Cramer said Thursday on " Squawk on the Street ," after the wholesale retailer reported a solid April sales report. "I know the multiple is very high, but they offer such a bargain." Costco trades at a forward price-to-earnings multiple of 44.8 — above its five-year average of 35.9 times and the industry, according to FactSet. Cramer said the P/E is currently not a concern because he thinks the stock can go higher. He pointed out that investors still expect a membership fee increase at some point. It's historically overdue. This is the second catalyst for the stock that the CNBC Investing Club had been waiting for. The other one, a long-awaited special cash dividend, was declared last year. Wells Fargo, however, said it's "tough to get behind valuation" given shares have extended to near all-time highs, which creates an "unappealing risk/reward." The Wells Fargo analysts kept their price target of $750 and reiterated its equal weight hold-equivalent rating. COST 1Y mountain COST stock 1-year performance. Costco shares rose nearly 1.5% after Wednesday evening's monthly sales report showed core comparable sales, which exclude gas and foreign exchange fluctuations, gained 5.5% last month. While below Street estimates of 6.2%, core comps were still pretty strong considering the negative impact of a tough monthly comparison from this year's Easter calendar shift. The stock has been on a comeback lately after a post-earnings swoon of more than 7.5% on March 8 — the session after the company's sales did not meet the high bar. A recent run of five out of six days of solid gains, however, has brought shares less than 2% away from its March 7 all-time high of $787. Costco has risen 17% in 2024 — outpacing the S & P 500 's 9% year-to-date advance and the consumer staples sector 's 7.5% increase over the same stretch. The consumer staples sector index hit a multiyear high on Thursday. Costco's non-foods increased mid-single digits in April compared to low-double digits the prior month — led by high demand for gold bars . Gold has had a markup but not at Costco and that's been bringing in a new cohort of customers, Cramer said during the Club's Morning Meeting on Thursday. Cramer values Costco's retail leadership in low prices and value during what appears to be an emerging softer spending cycle. "They are what the Fed needs more than anything else in the world," he said. "A company that goes to the suppliers and says, "No, we're not taking that price. You're lowering that price." Wall Street analysts largely responded positively to Costco's April sales, too, with JPMorgan raising its price target on the stock to $804 per share from $761 and keeping a buy-equivalent overweight rating. Goldman Sachs analysts increased its Costco price target to $840 from $830 and also maintained its buy rating. The Club currently has a 2 rating on Costco shares and a price target of $800. Costco is scheduled to report its fiscal 2024 third quarter on Thursday, May 30 after the closing bell.