Costco Stock Forecast: Is Costco Stock a Good Buy?
Let's look at Costco stock forecasts and predictions for the rest of 2021.
Costco, the Washington-based global retailer operating a chain of discount stores, has reported fourth-quarter earnings that beat expectations, with a 20% increase for the year, largely in line with the S&P 500.
However, Costco's chief financial officer, Richard Galanti, admitted during the Q4 conference call that a shortage of merchandise was among other risks for the company. In light of the latest news, what is the Costco stock forecast for 2021?
Shares in the company, which sells groceries, appliances, jewellery, cameras, sporting goods, furniture, office supplies and a variety of other products, were up almost 5% to 464.45p in early trading the day after the results.
This was still down on the 10-year high of $469.77 in early September 2021, but the stock price soon retraced to around $460 after a Wall Street wringing out. After strong Q4 2021 results, the Costco price rose from a strong support line at $456. What does this mean for Costco stock forecast?
At the beginning of March 2021, Costco’s Q2 earnings missed analysts’ expectations, while sales beat them, leading the Costco stock price back to a $307 support level. So will the Costco share price witness a similar pullback, or will it keep its uptrend longer?
Covid-related pressures have seen the company put limitations on customers on key items such as bathroom tissues, paper towel rolls and high-demand, cleaning-related stock-keeping units (SKUs).
Rising transportation costs and supply issues are also causing problems. Galanti said: “Furniture delays and some shortages have caused traditional roll-out times to go from eight to 12 weeks, from eight to 12 weeks up to 16–18 weeks.”
Let’s look at Costco’s stock predictions and forecasts for the rest of 2021
At the beginning of 2020, the Costco share price was close to a $300 breakout. At this point, the company had become one of the biggest US wholesale club operators, with more than 700 membership warehouses stores.
However, amid US Covid-19 restrictions, the Costco stock price failed to maintain the breakout direction until July. The company had previously reported net sales of $12.55bn for the retail month of May, up by 7.5% from the previous year, thus reassuring investors. Still, the share price on the market witnessed a $300 failed breakout.
The $300 support was instead confirmed as the company reported on 8 July a further increase in net sales at $16.18bn. A few days later, the announcement of a quarterly cash dividend on Costco common stock of 70 cents per share triggered the price to break the resistance and move to a $320 new support by mid-July.
A special cash dividend of 10 cents per share announced in mid-November 2020 and net sales increasing by 15.9% in October, on a yearly basis, prompted Costco stock price to around a $390 resistance level.
However, the share price retracted, triggering a reversal that lasted until March 2021. Then Costco’s Q2 earnings missed analysts’ expectations as sales beat them, leading the Costco stock price back to a $307 support level.
Q4 2021’s strong results
Costco has since recorded some of its best quarters ever, successfully adapting to e-commerce, even managing to compete with giants such as Amazon as its e-comm app witnessed more than 10 million downloads.
In early September, a series of announcements from several rating agencies brought the price to a 10-year high of $469.77.
Profit-taking caused the Costco share price to retrace and fluctuate around a $455 level until the company published its Q4 results on 23 September, reporting that its net sales for the quarter increased 17.5% to $61.44bn from $52.28bn the previous year, while net sales for the fiscal year increased by 17.7% to $192.0bn, up from $163.2bn.
Net income for the fiscal year was $5.01bn or $11.27 per diluted share, compared to $4.00bn or $9.02 per diluted share in 2020.
Galanti said: “I get back to thinking that due to the unfortunate thing called Covid, some businesses have benefitted in the sense that we were essential, in the sense that ... we are able to merchandise wide to have pivoted and maintain, notwithstanding supply-chain issues, and maintain an exciting full warehouses of merchandise. So I think those are the things that help us.”
During its Q4 conference call, the company underlined some of the major risks for the future of its business, estimating the overall price inflation of its products to be in the 3.5%–4.5% range as inflationary factors grow.
Galanti said: “Inflationary factors abound: higher labour costs, higher freight costs, higher transportation demand, along with container shortages and port delays, increased demand in certain product categories, various shortages of everything from computer chips to oils and chemicals, higher commodities prices. Containers, trucks and drivers all are impacting the timing of deliveries and higher freight costs.
“Despite all these issues, we continue to work to mitigate cost increases in a variety of different ways, and hold down and/or mitigate our price increases passed on to the members. We've also chartered three ocean vessels for the next year to transport containers between Asia and the US and Canada,” he continued.
“And we’ve leased several thousand containers for use on these ships. Every ship can carry 800–1,000 containers at a time. We’ll make approximately 10 deliveries during the next year. Price increases on items shipped across the oceans, some suppliers or us paying to six times for containers and shipping.”
Costco stock price forecasts for 2021
After Q4 results, Morgan Stanley raised Costco’s target price from $500 to $510 with an “overweight” rating. The most prudential evaluation came from Deutsche Bank, which gave the company a $424 target price and a “hold” rate.
On the other hand, according to TipRanks, based on 17 Wall Street analysts offering 12-month price targets for Costco in the past three months, the average price target is $479.47, with a high forecast of $525.00 and a low forecast of $385.00. The average price target represents a 3.46% change from the last price of $463.44.
WalletInvestor instead sees the Costco stock price moving in the range of $472–$474 by the end of 2021. Its Costco price forecasts for 2025 sees the company’s stock price around $748 in December of that year.
No split is scheduled so far. The stock split four times since then, two for one in 1991, three for two in 1992, one for one in 1994 for the new enterprise related to the spin-off of Price Enterprises, and two for one in 2000. The split-adjusted initial public offering price was $1.67.
The opinion of analysts looks mixed. According to Macrotrend.com, the current price-to-book ratio – evaluating a firm's market value relative to its book value – for Costco as of 23 September 2021 is 11.78p.
You can start your research from this, always remembering your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money.
Costco pays a quarterly dividend that doesn’t yield a high amount – currently 0.70%, compared to the average of 1.58% offered by its competitors. But it also pays a special dividend on occasion, almost every two years over the last eight years. The last special dividend of 10 cents per share was paid in December 2020.
You can buy tokenised Cosco stock on Currency.com.
COST price history
|Oct 26, 2021||485.21||3.41||0.71%||481.80||487.90||481.70|
|Oct 25, 2021||489.91||7.63||1.58%||482.28||491.87||479.29|
|Oct 22, 2021||481.77||2.69||0.56%||479.08||484.75||477.80|
|Oct 21, 2021||476.99||8.19||1.75%||468.80||477.33||468.80|
|Oct 20, 2021||469.56||1.76||0.38%||467.80||472.19||467.24|
|Oct 19, 2021||466.83||4.37||0.94%||462.46||466.90||460.10|
|Oct 18, 2021||461.74||12.35||2.75%||449.39||462.09||448.30|
|Oct 15, 2021||451.99||-1.07||-0.24%||453.06||453.13||448.98|
|Oct 14, 2021||450.37||3.82||0.86%||446.55||451.46||446.17|
|Oct 13, 2021||445.04||-3.26||-0.73%||448.30||450.11||443.81|
|Oct 12, 2021||446.68||-2.14||-0.48%||448.82||452.69||445.56|
|Oct 11, 2021||449.37||-1.09||-0.24%||450.46||453.30||449.13|
|Oct 8, 2021||451.47||-3.33||-0.73%||454.80||455.13||449.63|
|Oct 7, 2021||452.57||-3.67||-0.80%||456.24||459.30||451.83|
|Oct 6, 2021||449.13||6.32||1.43%||442.81||449.42||441.97|
|Oct 5, 2021||445.81||5.75||1.31%||440.06||448.83||440.06|
|Oct 4, 2021||439.91||-6.56||-1.47%||446.47||448.94||435.88|
|Oct 1, 2021||447.81||-1.51||-0.34%||449.32||450.88||440.58|
|Sep 30, 2021||449.14||-4.11||-0.91%||453.25||454.84||449.06|
|Sep 29, 2021||451.64||2.08||0.46%||449.56||455.70||448.15|