Shares of BJ’s Wholesale Club are ready to make a comeback against rival Costco, according to TD Cowen. The firm started coverage on BJ’s at an outperform rating and set a price target of $80, which would represent an 18% gain from here. “We like BJ’s wholistic approach to club membership engagement which incorporates digital analytics & a complete basket value proposition with strong appeal to a younger demographic,” analyst Oliver Chen wrote in a note Thursday. “We model high single-digit long-term EPS growth on low single-digit comps & growth from a young base of 238 stores.” Shares of BJ’s are up just about 2% this year, trailing Costco’s 23% gain. But Chen sees BJ’s catching up as it leverages its customer base, grows stores and takes some market share. The average BJ’s customer is 43 years old with a $104,000 income, compared to an average age of 45 years old and income of $103,000 for the typical Costco customer, according to TD Cowen. BJ YTD mountain BJ’s so far this year “We see BJ’s as well positioned for market share gains over the long run given a competitive digital focus that should yield more frequent engagement, drive a greater appeal among younger & wealthier consumers, and fuel stronger data analytics relative to Costco and Sam’s,” Chen wrote. The firm’s new price target implies that its current 16X forward P/E ratio on 2024 earnings estimates would expand to a 20 multiple. To be sure, TD Cowen is bullish on Costco as well, rating the warehouse competitor outperform and seeing it as a top pick in the sector.
