Can Costco’s Stock Continue Its Run?

-0.08%
Downside
470
Market
469
Trefis
COST: Costco logo
COST
Costco

Costco’s stock (NASDAQ: COST), a warehouse club operator, has increased 7% over the last twenty-one trading days (one month) and currently stands near $560. It should be noted that the broader S&P500 returned a 5% growth during the same period. Almost two years into the pandemic – the company’s sales growth isn’t slowing, even as economies reopen and consumers have more options to spend elsewhere. Costco’s business model which is based on membership fees – is known for collecting fees from its members and selling items in bulk at rock-bottom prices while making most of its operating margin from these membership fees. Moreover, it passes on cost savings to consumers by eliminating overhead costs like a salesperson and ornamental buildings (a business model oddly well-suited to the current economic times).

Costco has 62.5 million paying membership households worldwide and boasts of a retention rate of 91.6% in its key U.S. and Canada markets and 89% worldwide. In the fiscal first quarter, Costco’s net sales surged 16.7% year-over-year (y-o-y) to $49.4 billion, fueled by store openings and robust same-store sales growth. Our Costco Revenues dashboard provides more insight into the companies’ revenues. Costco reported a comparable sales rise of 9.8% after stripping out the impact of gas prices and foreign exchange in Q1, topping the consensus estimate of +8.3%. To add to this, comparable sales were up 9.9% in the U.S. and were 10.9% higher in other international markets other than Canada. In addition, the retailer’s membership fees were up 10% y-o-y to $946 million. That said, Costco’s net income also rose 13.6% y-o-y to $1.3 billion, translating to $2.98 per share.

Now, is COST stock poised to grow further in the short term? Based on our machine learning analysis of trends in the stock price over the last ten years, there is a 69% chance of a rise in COST stock over the next month (twenty-one trading days). See our analysis on Costco’s Stock Chance Of Rise for more details.

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If you are considering COST stock as an investment option over a longer time frame, you can explore our forecast for Costco’s Valuation dashboard.

Calculation of ‘Event Probability’ and ‘Chance of rising’ using last 10 year data

[1] Returns of -0.07% or lower over a five-day period in 1037 times out of 2516 (41%); Stock rose in the next five days in 612 of these 1037 instances (59%)

[2] Returns of 2.9% or higher over a ten-day period in 645 times out of 2515 (26%); Stock rose in the next ten days in 386 of these 645 instances (60%)

[3] Returns of 6.7% or higher over a twenty-one-day period in 332 times out of 2515 (13%); Stock rose in the next twenty-one days in 228 of these 332 instances (69%)

Also, Costco Peer Comparisons summarizes how the company fares against peers on metrics that matter.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Returns Jan 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 COST Return -1% -1% 252%
 S&P 500 Return 0% 0% 114%
 Trefis MS Portfolio Return -2% -2% 285%

[1] Month-to-date and year-to-date as of 1/5/2022
[2] Cumulative total returns since the end of 2016

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