Costco Wholesale Corporation (COST), headquartered in Issaquah, Washington, operates membership warehouses. With a market cap of $394.6 billion, the company sells all kinds of food, automotive supplies, toys, hardware, sporting goods, jewelry, electronics, apparel, health, and beauty aids, as well as other goods.
Companies worth $200 billion or more are generally described as “mega-cap stocks,” and COST definitely fits that description, with its market cap exceeding this threshold, reflecting its substantial size, influence, and dominance in the discount stores industry. Costco dominates the U.S. warehouse club industry with a significant market share, offering value and quality that attract a loyal customer base. Its no-frills, bulk-selling model ensures high sales volume and profitability despite thin margins.
Despite its notable strengths, Costco slipped 3.6% from its 52-week high of $918.93, achieved on Aug. 27. Over the past three months, COST stock gained 6.2%, underperforming the Consumer Staples Select Sector SPDR Fund’s (XLP) 6.9% gains during the same time frame.
In the longer term, shares of Costco rose 34.2% on a YTD basis and climbed 62.7% over the past 52 weeks, outperforming XLP’s YTD gains of 15.5% and 16.3% returns over the last year.
To confirm the bullish trend, COST has mostly traded above its 50-day moving average since early May, with slight fluctuations recently. It has traded above its 200-day moving average over the past year.
Costco's overall performance can be attributed to its frequent offers on specific items every month, which bolsters its sales. Despite economic challenges, Costco reported strong growth in net income and membership fees, indicating high customer loyalty and cash flow. COST shares closed up more than 1% after reporting its Q3 results on May 30. It recently raised its membership fees, which has benefited its financials.
Costco’s rival, Walmart Inc. (WMT), lagged behind the stock, with 44.1% returns over the past 52 weeks. However, WMT outperformed the stock with 46.5% gains on a YTD basis.
Wall Street analysts are highly bullish on COST’s prospects. The stock has a consensus “Strong Buy” rating from the 29 analysts covering it. While COST currently trades above its mean price target of $880.65, the Street-high price target of $1,050 suggests an upside potential of 18.5%.
On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
