Costco Wholesale Corp. (COST) has posted impressive growth for years, lifting into the 39th slot in SP-500 index capitalization. The big box retailer sharply increased market share in the first quarter, staying open as an essential services provider while many rivals were forced to close or curtail operations. That benefit has underpinned sales throughout 2020, generating a series of all-time highs. It currently boasts a 31% year-to-date return after booking a 44% return in 2019.
Costco Looks Ahead To 2021
The stock posted an all-time high at the start of Tuesday’s U.S. session and pulled back, highlighting mixed sentiment about COVID-19 beneficiaries while Pfizer Inc. (PFE) and Moderna Inc. (MRNA) load vaccines into refrigerated containers for distribution around the world. However, mega-retailers will benefit from the pandemic far longer than the majority of smaller companies that attracted intense interest in the second and third quarters.
Telsey Advisory Group analyst Joseph Feldman raised his price target to $430 on Tuesday, maintaining an ‘Outperform’ rating. He pounded the table in his commentary, stating “we forecast a total comp of 12.5% vs. 5.3% last year. Excluding a projected net gas and FX headwind of about 150 bps, we estimate a core merchandise comp of 14.0% vs. 4.8% last year, with a US comp, ex-gas, of 14.0% vs. 4.3% last year. Overall, we expect another strong monthly sales report, highlighting high member loyalty, the focus on value, and improvement in digital.”
Wall Street And Technical Outlook
Wall Street consensus has been solid as a rock for years, with the current ‘Strong Buy’ rating computed from 17 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions, even though price has nearly doubled in the last two years. Price targets now range from a low of $310 to a Street-high $435 while the stock opened Monday’s U.S. session about $4 above the median $386 target.
Costco has posted a nearly endless string of higher highs and higher lows since 2009, making it one of the SP-500’s top long-term performers. High volatility hit the uptrend in February 2020 when debate first erupted about potential COVID beneficiaries. It carved a broad triangle pattern into June and broke out, adding more than 100 points into October. The stock is now attempting to break resistance at that level and mount 400 for the first time.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.