Shares of Costco (NASDAQ:COST) are volatile after the retailer easily topped estimates for June sales. After jumping over 2% to $161.35, shares are now only up 0.56%.
BMO Capital Markets (Outperform, $185 PT) analyst Kelly Bania calls out the "particularly impressive" results for Costco considering the ongoing challenging trends experienced across other parts of retail and Amazon fears. RBC Capital (Outperform, $190 PT) thinks investors have a chance to buy Costco at a significant discount to its historic earnings multiple after the Amazon-Whole Foods deal cut into share price. Stifel Nicolaus (Buy, $173 PT) expects another three quarters of at least mid single-digit sales growth. Looking further ahead, Wells Fargo (Market Perform, $170 PT) sees challenges for the industry amid higher operating costs and increased competition. Valuation is a "sticking point" for Wells analyst Zachary Fadem.
Key events are scheduled for the companies listed below during the holiday-shortened week.
Notable earnings reports: PriceSmart (NASDAQ:PSMT) on July 5, Rand Logistics (NASDAQ:RLOG) on July 5, Yum China (NYSE:YUMC) on July 5, Cherokee (NASDAQ:CHKE) on July 6.
Expected IPO filings: None.
IPO quiet period expirations: Smart Global Holdings (Pending:SGH) on July 3, ShotSpotter (Pending:SSTI) on July 3, Appian Corp (NASDAQ:APPN) on July 4, WideOpenWest (Pending:WOW) on July 4.
Secondary offering lockup expirations: Agios Pharmaceuticals (NASDAQ:AGIO) on July 3, RSP Permian (NYSE:RSPP) on July 3, Quotient (NASDAQ:QTNT) on July 5, Synacor (NASDAQ:SYNC) on July 5, Everbridge (NASDAQ:EVBG) on July 5, Catalyst Biosciences (NASDAQ:CBIO) on July 6, Codexis (NASDAQ:CDXS) on July 6, Hyatt Hotels (NYSE:H) on July 7.
Notable annual meeting: TICC Capital Group (NASDAQ:TICC) on July 6.
Special shareholder meetings: Conyers Park Acquisition (NASDAQ:CPAA) on July 5, Galena Biopharma (NASDAQ:GALE) on July 6, Alere (NYSE:ALR) on July 7.
M&A watch: Expected closing for the merger between General Electric (NYSE:GE) and Baker Hughes (NYSE:BHI) on July 3.
Monthly sales update: Costco (NASDAQ:COST) on July 5, L Brands (NYSE:LB) on July 6, Buckle (NYSE:BKE) on July 6, Fred's (NASDAQ:FRED) on July 6, Cato (NYSE:CATO) on July 6.
FTC watch: Timing agreement expires on Cabela's (NYSE:CAB)-Bass Pro Shops merger.
FDA watch: Pfizer (NYSE:PFE) present briefing documents on July 7 ahead of an Oncologic Drugs Advisory Committee meeting on the Mylotarg application.
Barron's mentions: Big returns are seen for Bristol-Myers (NYSE:BMY) and Altaba (NASDAQ:AABA). New competition is expected to pressure Intel (NASDAQ:INTC) and iRobot (NASDAQ:IRBT). A cover piece on Bitcoin (COIN, OTCPK:BTCS, OTCPK:BTSC, OTCPK:GAHC) dives into the basics on the cryptocurrency. Grant's Interest Rate Observer chips in this week with a warning on the impact of organic players on Kraft Heinz (NASDAQ:KHC) and pricing pressure across the food sector from Amazon (NASDAQ:AMZN). Watch for a breakout in gold (GLD, IAU) upwards, advises Barron's.
The deal is bad news for TGT, according to Gordon Haskett Research Advisors, in light of AMZN's more affluent customer overlap with TGT and TGT’s struggles with its grocery business; the firm says TGT "should use today’s news to substantially accelerate its investments in price/grocery/store experience/e-commerce.”
UBS analysts view the deal as negative for TGT, "as it could further complicate efforts to gain traction creating a stronger, better-for-you good offering in its stores," adding that Costco's (NASDAQ:COST) “limited assortment, low cost structure, and deep private label penetration probably means its fortunes will be preserved, at least for the foreseeable future."
But today was a TGT buying opportunity for Jenny Van Leeuwen Harrington, portfolio manager at Gilman Hill Asset Management, as the pullback was "wildly overdone given the company’s health and premier position in a segment of the retail market that remains critical to the fabric of America’s shopping needs."
Gilman Hill also likes TGT’s free cash flow generation of more than $5/share, which also means the $2.36 dividend has "more than sufficient coverage as we look ahead."
Shares of Costco (NASDAQ:COST) are down a whopping 7.46% after Amazon acquires Whole Foods.
Though it's unclear yet what direction Amazon will take with the Whole Foods stores it acquired, there's no question that Costco could be in harm's way given the Seattle company's penchant for operating at razor-thin margins.
Volume on Costco is already 2X normal activity after less than 30 minutes of trading.
Jet.com plans to phase out selling Kirkland products off its website, according to company reps.
The development isn't a shocker considering that Costco (COST +0.5%), which owns the Kirkland Signature brand, is a direct competitor with Jet.com owner Wal-Mart (WMT +0.4%). On that note, the Bentonville retail giant is looking to increase private label sales for its Sam's Club business.
J.C. Penney (JCP +0.4%) is among the companies with the most to gain from the decline of Sears (SHLD -6%) since it is in the best position to capture share and sales given similar average household income, among other reasons, Cowen's Oliver Chen says.
Also, JCP has been aggressively expanding its home department by adding appliance show rooms and is conducting home service tests - JCP previously noted their best performing stores are ones located in malls shared with Sears - and off-price retailers have significant room for expansion over the medium term with potential growth of 50%-70%, including both existing banners and new banners, Cowen says.
The firm also thinks "super value" stocks such as Costco Wholesale (COST +0.6%) and Wal-Mart (WMT +0.8%) may benefit from share gains given existing traffic momentum and attractive low prices and merchandise margin structures.