Costco Wholesale Corporation (NASDAQ: COST) is an international membership warehouse chain mainly operated under the Costco Wholesale name. Its warehouse club model allows it to sell goods in bulk, which allows it to provide discounts on prices.
The company sells quality, branded merchandise at greater discounts than conventional retailers offer. Costco is renowned for its grocery sales. Additionally, it sells toys, clothing, electronics, and more.
Costco Stock Rally
Despite the ongoing macroeconomic challenges, Costco’s (COST) stock has been rallying. The stock is up 37.63% year-to-date, higher than the industry’s rise of around 7%. Costco has retained its position as a key player in the retail discount sector. Its success is due to its focus on customer-centric initiatives, a great membership program, and its commitment to providing value to its customers.
Its primary customer base is low to middle-income earners who have preferred Costco as macroeconomic conditions worsen. These factors have played an essential role in helping its membership warehouses record impressive sales figures.
Sales Results
Ahead of its fiscal Q1 2024 quarterly earnings report on December 14, 2023, Costco released an update on November sales figures on November 29, 2023. The company’s net sales for the three months ending November 26, 2023, were $56.71 billion, a 6.1% year-on-year rise. For November 2023, Costco reported $20.14 billion in net sales, a 5.1% year-over-year increase. Comparable sales for November were up 3.5% year-over-year.
In its October sales report, Costco saw net sales rise 4.5% to $18.53 billion year-over-year. The growth came after the retailer saw a 6% and 5% improvement in September and August, respectively. Comparable sales for October were up 3%, after a 4.5% and 3.4% increase in September and August, respectively.
Rising Membership Numbers
Costco has seen a rise in total paid membership. Its impressive membership renewal rate and growing customer base fuel rising sales. The retail giant has seen membership fees rise 13.7% to $1.5 billion in the last reported quarter, Q4 2023. In the quarter, the company saw membership at 71 million households.
Unique Market Approach
Costco has engaged in a unique market approach that entails finding untapped markets and creating offerings that meet the target customer base’s needs. It has helped the company establish itself as a dominant player in the retail industry.
The company has been steadily expanding its presence domestically and internationally. It has e-commerce operations in Canada, the US, UK, Korea, Taiwan, Australia, Japan, and Mexico.
Analysts’ Stock Forecast
By the end of fiscal year 2024, analysts project that membership will grow to 73.4 million, a 3.4% increase from fiscal 2023. Additionally, the project net sales will rise 3.7% while membership fees will grow 3.6%.
Based on these projections, analysts have given the stock a buy rating. That means they expect it to perform better than the rest of the market in the next 12 months. They have set a high price target of $652 and a low of $475. Their average target for COST stock is 587.81, a 5.78% decline from the closing price of $623.86 per share.
Should You Buy COST Stock?
At the current $623.86 per share, COST stock is trading close to its 52-week high of $625.03. The stock is already significantly higher than its 50-day and 200-day moving averages of $573.96 and $534.53, respectively. Those indicators are always a good sign of a stock’s future performance. In the last trading session, COST stock closed 2.14% higher.
While the stock has had a great run in 2023, the charts show that momentum is slowing. Additionally, trading volume is slowing. Consequently, COST stock might not be a great option for investors looking for growth in the short term. The stock is already at its highest point, and analysts agree, based on their average price prediction. However, investors will eagerly await its upcoming Q1 2024 earnings report, leading to a short-term rally.
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