Costco Stock Price Trades Near Record Highs As Panic Shopping Boosts Sales

Costco Stock Price Trades Near Record Highs As Panic Shopping Boosts Sales
Written by:
Michael Harris
6th March, 15:57
Updated: 3rd April, 04:41
  • Adjusted earnings: $2.10 per share vs $2.05 per share expected
  • Sales: $931 million vs $889 million a year ago
  • February resulted strongly impacted by an uptick in sales related to coronavirus
  • Stock price almost fully recovered from losses in February

Shares of Costco (NASDAQ:COST) have rallied more than 12% this week after the company reported stronger-than-expected sales for the latest quarter. The stock price has now nearly returned to record highs despite the coronavirus market selloff.

Fundamental analysis: Panic buying boosts sales

The Washington-based warehouse giant reported adjusted earnings of $2.10 per share on sales of $931 million compared to Wall Street expectations of $2.05 per share. For the same period last year, Costco earned $2.01 per share on the sales of $889 million.

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“The February results benefited from last week’s big uptick in sales, the fourth week of last month, mostly we believe related to the concerns around the coronavirus,” said Richard A. Galanti, Executive Vice President and Chief Financial Officer.

Sales grew 11% to $38.3 billion, beating analysts’ estimates of $38.2 billion. Same-store sales increased 9%.

“Net sales for the month of February came in at $12.2 billion, a 13.8% increase from $10.72 billion a year ago,” added Galanti.

Analysts believe that Costco may continue to benefit from the panic shopping.

“As consumers prioritize a dwindling number of trips to stores, [Costco] will likely be at the top of the list,” UBS analyst Michael Lasser said in a note to clients on Wednesday. “Over the long-term, we think the stock-ups will help accelerate [Costco’s] share gains.”

The company said it believes that around 3% of the increase can be related to consumers’ concerns regarding the coronavirus outbreak. Earlier, photos emerged of empty shelves of sanitizers at Costco.

“Like everyone, we are keeping a close eye on the developments around the coronavirus, including the impact on operations, the health and safety of our members and employees, and of course our supply chain,” noted Galanti.

Technical analysis: The stock price almost fully recovered

Shares of Costco have almost fully recovered after dropping nearly 20% from the record highs above the $325 mark. It is actually one of the very rare stocks to have managed to perform a “V turn” and fully recover in the past two weeks.

Costco stock daily chart (TradingView)

The stock price still trades lower, however, it has put itself in a much better position compared to the rest of the market. Shares are now testing the key short-term support in the range of $302 – $307, while a break of this level would open the door for a deeper pullback.

On the upside, the all-time high at $325.26 remains the target for the bulls in case the risk appetite improves.

Summary

Shares of Costco trade near the record highs despite the broader market selloff amid the coronavirus outbreak. The US-based warehouse giant reported better-than-expected quarterly sales.

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