Upside to Costco From Rising International Business

Jul.25.10 | About: Costco Wholesale (COST)

Trefis members have created forecasts for two key drivers of Costco’s (NASDAQ:COST) stock over the last week: (1) Costco International Warehouse Clubs and (2) Revenue per Square Foot for Costco International. Their forecast suggest that Costco’s International Warehouse Clubs as well as Revenue per Square Foot for International stores will trend higher than the Trefis forecast. These projections suggest a combined upside of nearly 5-6% for Costco’s stock

Costco International constitutes around 19% of the $50 Trefis price estimate of Costco’s stock. Costco, which with players like Best Buy (NYSE:BBY), Wal-Mart’s (NYSE:WMT) Sam’s Club, and Target Corporation (NYSE:TGT) in the US, will face new competition as it expands abroad.

Given the growing businesses of Costco warehouses internationally, Costco’s stock is quite sensitive to (1) Costco International Warehouse Clubs and (2) Revenue per Square Foot for Costco International. Below are charts showing recent estimates created by Trefis members for the two drivers in detail.

1. Costco International Warehouse Clubs

The average of forecasts for Costco International Warehouse Clubs created by Trefis members indicated a projected increase from 171 in 2010 to 254 by the end of the Trefis forecast period, compared to the baseline Trefis estimate of an increase from 149 in 2010 to 207 by the end of the Trefis forecast period. The member estimates imply an upside of 5% to the Trefis price estimate for Costco’s stock. In the past, Costco International Warehouse Clubs has increased from 102 in 2006 to 139 in 2009.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of Costco’s stock to Costco International Warehouse Clubs.

2. Revenue per Square Foot for Costco International

The average of forecasts for Revenue per Square Foot for Costco International created by Trefis members indicated a projected increase from $758 in 2010 to $828 by the end of the Trefis forecast period, compared to the baseline Trefis estimate of an increase from $740 in 2010 to $793 by the end of the Trefis forecast period. The member estimates imply an upside of 1% to the Trefis price estimate for Costco’s stock. In the past, Revenue per Square Foot for Costco International has decreased from $737 in 2006 to $705 in 2009.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of Costco’s stock to Revenue per Square Foot for Costco International.

Disclosure: No positions