Is Costco Stock A Good Investment? – (COST)
Can it beat Walmart and Target long-term ?
The general consensus amongst investors is that retail industry giants are going to continue to generate high stock prices. Results from the last few quarters show that most people are still making trips to their closest retail store and then resort to online stores for the remainder of their shop.
Costco stock was already strong, even before the recent retail industry spike. Costco stock is expected to be on the increase again, this potential upside can be attributed to the upcoming earnings call on Thursday, October 4.
Costco Future Growth
Costco is continuing to post months sales numbers, which signifies the company’s fiscal Q4 is looking strong in regards to revenue growth. Store sales have jumped by 7%, Costco made this announcement at the start of September. Exchange rate shifts and fuel price fluctuation have proven to be short-term issues for Costco. To summarize, Costco stock increase is due to the company’s U.S core market increasing by 8%.
Next week’s revenue call will quantify how much much Costco’s new customer base attributes to sales growth. We can expect to see Costco’s gains outperform Walmart quite significantly. Analysts estimate Costco’s traffic growth to be around 6%.
When comparing Costco to its rival companies like Target and Walmart (WMT), Costco is coming out on-top. Potential investors should be happy to see Costco’s sales gains increase across the entire year. This means that Costco has increased sales by 9% in the U.S. Management comments are likely to be positive.
Costco Stock Prediction
Costco stock is so enticing due to its profit model. Even during times of low spending, Costco will generate revenue because of their membership fees. Costco brings in most of its revenue by subscriber fees.
Analysts have increased Q4 earnings projections by almost 2%, with full-year projections also increasing for fiscal 2018 and 2019. Costco stock has hiked almost 11% since the end of June.
Its true that Costco brings in a low operating margin, but its profitability makes up for it. When comparing Costco’s profits to its competition, the company leads the pack. Companies like Kroger is experiencing lower profitability margins, which highlights the significance of Costco’s profits.
For Costco stock, profitability means an increase in investor demand.. thus an increase in share price.
Customer traffic is on the increase, with sales demand following suit. For Q4, it is likely that Costco will be able to increase margins. Higher subscriber fees will also generate more revenue, which means the Costco stock price will increase.
Costco’s membership statistics are healthy, with 199,000 near members being added to the current subscriber-base. 90.1% of members renew their membership. Subscriber income has jumped by 14% since last quarter.
An increase in membership fees will cause an increase in the Costco stock price. Analysts are expecting a 14% earnings increase to come this quarter, rising to around $2.36 per share.
The next fiscal year will show just how much difference a membership fee increase makes to the Costco stock price. There may also be a special Costco stock dividend for investors on the horizon.
I currently give Costco stock a “BUY” rating.