We Are Increasing Our Price Targets on Costco and Amazon

* We're hiking our Costco price target following knock-out December sales.

* We're also raising our target on Amazon, which was a holiday season winner.

Now that we've digested this morning's wave of economic data, including the December jobs report and ISM's December Services PMI let's turn to portfolio-related news, which has us making price target changes for Action Alerts PLUS positions Costco Wholesale  (COST) and Amazon (AMZN) .

Boosting Our Costco Target After Blow-Out December Sales

Costco reported December net sales that rose 9.9% YoY to $26.15 billion. The company's comparable sales (adjusted for the impacts of changes in gasoline prices and foreign exchange) rose 8.1%, with the U.S. up 7.4%, and its e-commerce business jumping 17.4% YoY. Our own visits to Costco during the holiday season saw brisk business, huge lines, and overflowing carts, but even we were surprised by how strong its December sales were.

With consumers still feeling the bite of inflation and Costco continuing to grow its warehouse footprint and high-margin membership fee revenue stream, we are boosting our price target to $700 from $670. And members, next week, on January 12, Costco will pay its $15 per share special dividend.

Amazon's a Holiday Winner, and We're Upping Our Target

Yesterday, Adobe Analytics reported that 2023 online holiday spending grew 4.9% to a record $221.1 billion, driven by cost-conscious consumers taking advantage of big discounts and buy now, pay later. That supports our thinking that consumers would lean into digital shopping to stretch their spending dollars -- as well as our views on Amazon and Costco, as evidenced by Costco's e-commerce December sales.

Building on that, this morning Route, a package-tracking app that captured holiday season data from 55 million orders, reported that Amazon captured 29% of global order volume in the final two weeks before Christmas, up from 21% the week of Thanksgiving and Black Friday.

Because we continue to see consumers leaning into digital shopping even as we sunset the holiday shopping season, as well as incremental leverage from Amazon's 2023 cost-cutting moves, we are hiking our price target on AMZN to $180 from $170.

At the time of publication,  Action Alerts PLUS was long COST and AMZN.