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Analysis of Costco Wholesale Corporation

Analysis of Costco Wholesale Corporation

1 June 2022

Costco: the strength is in customers 

The company, which is among the top 5 global retailers, manages more than 800 warehouses in 30 countries and develops the e-commerce segment. This is Costco, the capitalization of which is estimated at $206 billion, and the growth potential of the shares is about 8.5% in the medium term. 

Recently the company has presented its financial results for the first quarter:

  • revenue increased by 16.2% YoY to $52.6 billion, which was higher than expected;
  • long-term debt decreased by 2.8% YoY;
  • adjusted earnings per share (EPS) increased by 10.5% YoY to $3.04, in line with expectations;
  • sales in the e-commerce sector increased by 7.4% YoY, also due to a discount in fuel sales.

The accompanying statement mentions that the company sees problems related to the persistence of disruptions in supply chains, constantly occurring lockdowns due to coronavirus and other aspects. The impact of inflation is also noted: Costco will raise retail prices for some products. 

The retailer’s strong position is that, unlike Walmart, it works with a more solvent group of the population. This smooths out the likely consequences of higher prices. 

It is assumed that in the second quarter EPS will increase by another 5-7%, in the third – by 20-24%. 

On the daily technical chart, the MACD indicator forms the basis for buying, leaving the negative area. The Stohastic indicator is steadily rising, signaling buying opportunities. 

The nearest target of the rise is at $483-485, then $510.

1 June 2022
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