12:04 PM EDT, 09/09/2024 (MT Newswires) -- Costco Wholesale ( COST ) has a forward price-to-earnings multiple, or future valuation, that sets a high, but likely achievable bar, underpinned by durable growth drivers, analysts at Morgan Stanley said in a note Monday.

Costco's next 12-months price-to-earnings ratio is around 50 times, the analysts forecast, setting a "high bar" but one that is attainable.

"We believe [Costco's] growth drivers are durable, and both historical performance as well as our view of the future of retail point to further upside," Morgan Stanley said.

Future growth is anticipated from Costco's proven success with new warehouses and market share gains, despite major competition, with additional potential from untapped revenue opportunities in digital media, Morgan Stanley said.

Costco's margin expansion assumptions rely on new management's strategy to improve selling, general, and administrative leverage. The retailer's terminal growth assumption of about 3% reflects a nearly 100 basis point premium over long-term US GDP growth, Morgan Stanley added.

"Risks from here include less consistent comp growth, a higher long-term level of investment required to fuel growth, and higher long-term interest rates," Morgan Stanley said.

Morgan Stanley has an overweight rating on Costco and raised its price target to $950 from $855.

Price: 891.75, Change: +15.07, Percent Change: +1.72