Is it Time to Invest in Costco Stock?

Is it time to invest in Costco stock?
Costco has seen tremendous growth in recent years, but its stock has been lagging.

Is it time to invest in Costco stock? I am not a certified financial planner, so this article will purely be opinion.  You will have to do your own due diligence to decide if you want to be an investor or not.

An Interesting Retailer

Costco  is a unique retailer. Hot dogs are $1.50. You can eat one while you browse jewelry that costs $250,000. You can eat free samples of food, buy living room furniture, a new central air conditioner, and bulk packages of toilet paper. $60 a year will get you in the door. The experience begins after that.

In an era when many retailers are struggling to survive Costco is thriving due to a die-hard customer base. More recently, the buy in bulk nature of the retailer’s offerings made it the perfect place for a panicked public to stock up on supplies during the pandemic.

Costco has a number of interesting business lines.  Most of the company’s gross revenue comes from selling in its warehouse stores, but the company also has a number of successful add-ons, including Costco Gas Stations, Costco Tire centers, Costco Travel, and others.

Technical Analysis

Here are some recent numbers to digest before you decide if you want to invest in Costco stock.

Costco reported earnings on March 4th. They showed a 15% increase in sales growth year over year. Costco cardholders rose to a high of 105 million in 2020. That is up from 98.5 million in 2019. Same store sales also showed an increase of 13.8% year over year.

Ecommerce showed a 91.1% increase for the month of February, and renewal rates for membership reported a record high of 90.7%. Total sales were reported at $44.77 billion for the quarter and $222.7 Billion in fiscal year 2022 (here).

Despite all these strong numbers the stock has been somewhat of a laggard. It is currently trading around $364 a share. Roughly the same as it was last October. Less the dividend your investment would not have made you money in the past 6 months. Some analysts are claiming that the stock is overvalued. They point to a price to earnings ratio that is the highest it has been in over a decade. It is sitting at 37 as of the writing of this article. Other analysts point to recent positive news from the retailer as evidence that the stock still has room to run.

Is it time to invest in Costco Stock?

I am siding with the camp that says no. If you already own it, I advise holding. Collect the dividend and wait it out. But more analysts are bearish on Costco than not. Your hard-earned money could go somewhere else and probably perform better for you. A few examples of stocks in the retail space with strong buy ratings are Target and Kroger. Those may be worth looking into. For now, I am putting Costco on my watchlist, but I am not pulling the trigger.

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