Costco's Stock Falls After Analyst Downgrades On Concerns Negative Sentiment Will Trump Strong Fundamental

Shares of Costco Wholesale Corp. fell 0.6% in premarket trade Monday, after the membership-based warehouse retailer was downgraded at BMO Capital, which cited concerns that investor sentiment has soured as a result of perceived competition from Amazon.com Inc. . Analyst Kelly Bania cut the rating to market perform after being at outperform since January 2015, and slashed the stock price target to $160, which is 3.8% above Friday's closing price of $154.11, from $185. Bania stressed that the downgraded was not a call on Costco's fundamental outlook, which remains "strong." Bania said the "weak" stock reaction to "impressive" June same-store sales data suggests "investor sentiment, driven by Amazon fears, may continue to overshadow strong fundamentals." The stock has fallen 2.5% since the June data was released to close Friday at a 7-month low. "Despite Costco's significant price gap to Amazon...we believe near-term sentiment and fear of the long-term impact of Amazon on Costco's business--whether or not justified by fundamentals--could continue to create an overhang on [Costco] shares," Bania wrote in a note to clients. Costco's stock has dropped 10.0% over the past three months, while the SPDR S&P Retail ETF has lost 5.7%, Amazon shares have climbed 7.9% and the S&P 500 has gained 2.9%.