Costco Wholesale Corp.(NASDAQ:COST) saw its shares fall in pre-market trading after being downgraded by BMO amid fears about competitive pressure from internet retail giant Amazon.com Inc. (NASDAQ:AMZN).
The Canadian broker has cut its rating on the wholesaler’s stock to ‘market perform’ from ‘outperform’ and lowered its price target to US$160 from US$185.
In pre-market trade in New York today, Costco shares were down 0.5% at US$151.01 but then as the trading day began, they eased up 0.54% to $151.81. At the time of writing this update they are now up 0.03% to $151.05.
READ: Costco posts good sales as it readies for Amazon onslaught
In a note to clients, BMO’s analysts said: “Despite our continued belief that Costco’s outlook remains strong, the reaction to Costco’s impressive June comp figures (stock down ~2.5% in the past two days) suggests that investor sentiment, driven by Amazon fears, may continue to overshadow strong fundamentals.”
They added: “In this asymmetrical environment, we believe it’s difficult to argue that the stock will outperform despite our continued outlook for comp upside and strong fundamentals.”
The retail sector was rocked recently by Amazon’s US$14bn bid for Whole Foods Market Inc. (NASDAQ:WFM) which has raised fresh worries about the impact of the internet giant’s move into the grocery and supermarket sector.
Last week, Costco reported a 7% rise in sales for June at US$12.2bn, while for the year so far, revenues were 6% higher at US$104.3bn.
On a like-for-like basis sales this year rose by 3.4%, with the group’s international and Canadian operations both outshining the US.