Is Costco Too Close to the Top? By TipRanks
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Costco (NASDAQ 🙂 is perhaps most well-known for its great Idiocracy scene “Welcome, Costco.” I love you .”). The company’s large-scale bulk sales also gave it some cache. The company released details about the sales recently. They are trending upward even though most pandemic-related stocking has slowed down. Although Costco can be a valuable business, I find its current situation somewhat bearish.
The Costco stock in this year’s can be divided into two periods: the unexpected down and the up which proved that the down was not necessary. Between January and mid-February the stock had a relatively stable trend line. However, the stock plummeted after mid-February. In the span of three weeks, that one-off drop wiped out about $40 from the share price. It recovered quickly to the levels it had been at just three weeks before that plunge. Since then, it has been steadily climbing to reach its peak around three weeks back. While the share price is now slightly lower than its peak, that’s still within $20. TipRanks shows Costco stock chart.
Costco reinforced the message by sharing comparable sales figures from the previous month. They were also up by 14.3% compared to the previous month. Even better than last month’s month-to month differences, which saw an increase of 14.2%.
Rupesh Paraikh of Oppenheimer pointed out several important drivers for these numbers. Parikh pointed to the ongoing preference for eating at home, inflationary issues, and a consumer spending backdrop he considers “robust.”
This is in addition to Costco’s previous moves to limit purchases of certain supplies such as toilet paper and bottled water. COVID-19 case numbers are soaring in some areas and consumers were seen stockpiling again.
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Wall Street Take
Costco has been rated a moderate buy by Wall Street analysts. According to projections by 22 analysts with 12-month price targets issued on Costco in the past three month, sixteen of them consider the stock a Buy. Six others consider it to be a Sell. It is relatively recent to be a Moderate Buy. Costco was a Strong Buyer from October 2020 through September 2019. However, it briefly fell to Moderate Buy March 2021 and seems to be back there now.
Costco has a wide range of price targets. With a maximum price of $525, the average Target is $496.63 and a minimum of $423 respectively, it’s $496.63. This represents a 9.9% upside potential, considering Costco’s most recent price of $451.85.
A Shaky Hill’s Stock-Up King
We saw it back in 2020, when the pandemic was getting started and the word “lockdown” entered the national lexicon. No one really knew just what a “lockdown” was. The concept had never been used before. It wasn’t seen before.
People would not hesitate to stockpile toiletries and food in the event of government demands. When people wanted to stock up, they thought “bulk purchases,” and that for many meant Costco.
Stockpiling started to fall after it became apparent that grocery stores would still be functional. At least, things started to get back to normal. However, stockpiling is increasing. This is not due to shipping issues, but lockdowns. The supply chain is in shambles the world over—just ask the fleet of cargo ships parked off the coast of Los Angeles—and that means people are trying to insulate themselves against the effects of a supply shortage.
Costco may be undervalued according to some. It’s understandable, Costco has seen a steady rise in value for many months. At the moment, Costco is trading close to its 52 week high. The company is also just short of the highest price target.
Costco can take a plunge. You can be sure that getting in early is a way to get close to the top. Costco shares may rediscover an appropriate price point, and investors will likely lose some of what they invested.
Conclusion Views
Costco stock can either be sold or held. Costco stock is likely to have reached or very close to the peak of its trading range. It’s difficult to believe that it could move much higher than the 52-week mark. This is a more impractical hope. The downside risk of buying in is quite high, since almost every milestone falls below the current costco price.
If the market falls, then sellers may be able twice as likely to purchase back in. Alternatively, sellers could be able buy back twice as many shares later after the price drops. In this case, holders would receive a reward. Costco is the best option, but it has very little chance of being successful. There is a lot at stake and little upside potential when you buy.
Everyone turns to Costco for stocking up. Costco may experience a slow slide down if it runs out of products to stock up on.
Disclosure: Steve Anderson didn’t hold any positions in the securities listed in this article at the time it was published.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of Tipranks or its affiliates, and should be considered for informational purposes only. Tipranks cannot guarantee the reliability, completeness or accuracy of any information. This article is not intended to be interpreted as an offer or recommendation for the purchase or sale of securities. This article is not intended to provide advice on legal, investment or financial matters. Tipranks or its affiliates are not responsible for the contents of this article. Any action you take based on the information is your responsibility. Tipranks’ or any affiliates are not authorized to link to the article. Performance in the past is no guarantee of future performance, price or results.
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