Is Costco a buy ahead of the holidays?
With the holiday season coming up, investors may need to turn back to the retail juggernaut as the stock price could definitely be on the rise in the short-term future.
avatar
Mike Sakuraba graduated with double major of English and Economics. Part time writer, part time investor, full time dad. Mike loves writing about technology, sports, and investing.
2020-11-13 06:30

When we think of companies that have thrived during the pandemic we automatically turn our minds to at-home or work from home businesses like DocuSign (NASDAQ:DOCU) or Wayfair (NYSE:W). When we think of retail companies we would naturally turn to Home Depot (NYSE:HD), Lowe’s (NYSE:LOW), or even Amazon (NASDAQ:AMZN). But trucking along in the background, putting up consistent quarter after consistent quarter, is perhaps the king of consumer retail: Costco (NASDAQ:COST). With the holiday season coming up, investors may need to turn back to the retail juggernaut as the stock price could definitely be on the rise in the short-term future.

Is Costco a buy ahead of the holidays?

A flurry of Wall Street analyst upgrades have peaked investor interest in the wholesale distributor. Most recently, Simeon Gutman of Morgan Stanley has upped his price target for Costco to $400, a price level that the retail giant has never reached. And Gutman is not alone. Several other research firms including RBC Capital, Oppenheimer, and J.P. Morgan have all increased their price targets of Costco to at least $400 with the highest being $435 by Stephanie Wissink of Jeffries. Wall Street is expecting big things from Costco this holiday season, and there are reasons why you should too.

Perhaps no retail outlet holds its membership exclusivity as highly as Costco, with membership renewals creating a near infinite recurring revenue stream. At the end of the last fiscal year in August, Costco had over 105 million members across 12 different countries around the world. Twelve countries? To me that screams the ability for Costco to expand into new markets. The total addressable market for Costco seems near limitless, as they have been known to cater their product selection to local domestic markets. If Costco expands, we can reasonably expect those membership totals to explode.

Costco thrived during COVID-19 as one of the few essential retailers that were allowed to stay fully open during the pandemic. Comparable same store sales have risen each of the last three months and as the world braces itself for the next wave that seems to be coming on strong, Costco should continue to thrive as the go-to for people who are stockpiling goods during the next quarantine. As awful as it may sound for our world, the longer the pandemic continues, the stronger Costco should perform.

So is Costco a buy right now? Yes, perhaps emphatically. No business may be set up to succeed more over the next few months than Costco and continuing double digit sales growth throughout the holiday season seems like a given at this point. Long-term investors may be interested in opening a position now as we approach huge upcoming retail dates like Black Friday and Christmas. With a strong upward trend in the stock performance as well as a fairly decent 0.75% dividend yield, Costco offers a ton of stability for investors during what could be a potentially volatile next few months.


Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

Rate this article

positive
negative
Published On
2020-11-13 06:30

avatar
About the Author
Mike Sakuraba graduated with double major of English and Economics. Part time writer, part time investor, full time dad. Mike loves writing about technology, sports, and investing.


buy-coffee
You've read 1 article in the last year
..thank you for supporting us and for visiting our site. Unlike many other sites, The Dog of Wall Street is available for everyone to read. Our focus is to provide great content for free. Do you like what we are doing? Buy us a cup coffee. It is the fuel that keeps us going..

Levi Strauss' Bold Gambit: Is the Denim Icon's DTC Shift Enough to Weather the Storm?
Levi Strauss & Co. boasts a strong quarter with direct-to-consumer growth and innovative fashion, but can it navigate the choppy waters of the retail market?
By Alfonso | 4 months ago

Amazon's Bold Counterattack: Introducing the China-Direct Discount Section
As competition heats up, Amazon unveils a daring new strategy to offer unbeatable prices and direct shipping from China.
By Alfonso | 4 months ago

Tesla's Legal Challenges: Facing the Music on Autopilot Misrepresentation
Court ruling intensifies scrutiny on Tesla's self-driving claims.
By Alfonso | 6 months ago

Netflix's Ad-Supported Triumph: A New Era in Streaming
Surpassing 40 million users, Netflix’s ad-supported plan redefines the streaming landscape.
By Alfonso | 6 months ago

Tesla Stock (TSLA): Look Who's Back!
I’m cautiously optimistic but I’m at the point where I need to see it to believe it.
By Mike Sakuraba | 6 months ago

2 Earnings To Pay Attention to Next Week
Since big tech is the theme, you probably know what I have my eyes on for next week.
By Mike Sakuraba | 6 months ago

2 Stocks to Watch Below $10
Here are two stocks that are currently less trading in the single digits that I believe have some relative upside from their current prices.
By Mike Sakuraba | 6 months ago

Looking Ahead to Tesla's Earnings: What Can We Expect?
Is there any stock that has been more talked about than Tesla (NASDAQ: TSLA) as of late? It’s a company that is always in the spotlight but the stock is under some heavy scrutiny this year and deservedly so.
By Mike Sakuraba | 7 months ago