Costco's Stock Rallies Toward 4-month High After Citigroup Turns Bullish

Shares of Costco Wholesale Corp. climbed 2.2% toward a four-month closing high in afternoon trade Monday, after Citigroup upgraded the membership-based warehouse retailer, citing expectations that industry headwinds should abate. Analyst Kate McShane raised her rating to buy, after being at neutral since Nov. 9, 2015. She raised her stock price target to $184, which is 12% above current levels, from $167. McShane said she now sees a "clear path" to accelerating same-store sales next year, given that the headwinds from gasoline price deflation, food price deflation and reductions in tobacco shop keeping units (SKUs) should start are expected to diminish in the near term. She said she also believes new co-branded credit card deals and the potential for tax changes could be "particularly favorable" to Costco's more affluent customers. The stock has tacked on 1.5% year to date, while the SPDR S&P Retail ETF has gained 6.9% and the S&P 500 has run up 11%.