I’ve been trading COST options for awhile and want to contribute to this great community. I’ve been hesitant to post a DD since because I’ve still got a lot to learn, especially regarding TA, but I’m encouraged by others posts.
Everybody knows Costco as the place to get 1.50 hotdogs and way too much toilet paper. It’s a big box wholesale retailer with 800 stores worldwide and continues to expand in the U.S., Europe, and most notably, China. Anecdotally, my wife and I are there at least once a week and it is always packed. I’ve been impressed with their products and customer service for years, which made me check out their stock. After getting burned on some riskier plays, Costco has been my reliable fallback.
COST seems to fly under the radar. It’s not the most exciting stock, there is no “squeeze” but it’s growth over the past few years is impressive, especially compared to the competition. It is up nearly 160% for the year, reaching a new ATH today at $543. The growth is largely attributed to an expanded e-commerce sector, international growth and the ongoing pandemic. Sales are up 14.9% in the U.S., 19.5% in Canada, and 15% internationally. P/E ratio is nearing 47.
Costco EPS for the quarter ending August 31, 2021 was $3.76 , a 20.13% increase year-over-year.
Costco EPS for the twelve months ending August 31, 2021 was $11.27 , a 24.94% increase year-over-year.
Costco 2021 annual EPS was $11.27, a 24.94% increase** from 2020.
Costco 2020 annual EPS was $9.02, a 9.2% increase** from 2019.
Costco 2019 annual EPS was $8.26, a 16.5% increase** from 2018.
I’m bullish on the stock overall and am anticipating a run into earnings followed by a pullback. I’m considering this a sell the news play If it follows a similar pattern to Target and Walmart’s last earnings, both saw a significant drop despite crushing earnings. I’m planning on getting more calls to load the week of 12/10.
Position
I currently have calls 11/26 $540, 12/3 $540, and 12/10 $510.
Disclaimer: Please do your own research in addition to this. I know this is not a very long or thorough DD, I’m typing it in my 11 month olds playpen right now. I mostly wanted to bring it attention to anyone interested in checking it out further, and to not just mention it in discord. Thanks!
I would like for more people to jump in on this one and review this company, the earnings play, and what everyone thinks. I will try to do some more myself and may look to start a position to just ride up until earnings, but sell before actual release. We do shop there a lot and it’s always packed. Biased, probably. Bullish, probably. It has been running and maybe good earnings will already be priced in as the 1YR and 5YR chart is just up. Thoughts all?
I don’t think anything can slow down COST. It does look like it’s at a top right now and might see some downward movement but honestly, I think COST could hit $550 pretty quickly.
I wholeheartedly agree that this will probably run up to earnings and that playing that run up would probably be crazy profitable using our current strategy of entries with FDs that match trend ~3 days before ER. Not much added DD needed on that, but as far as earnings go I’d be interested in what further info we can dig up on outlook.
Here’s some articles I pulled quickly from some archived articles (October) from Fox News:
Costco raised their minimum wage to $17 in February. Could have an impact on EBITDA:
Costco feeling the Christmas Tree supply squeeze, just sorta interesting:
More interesting is that Costco, like other big retailers, chartering entire container ships but suffering from delays at ports and driver/truck shortage. Shortages seem to be big ticket items for Christmas. But Costco was forward-focused and tried to order as much as possible as early as possible in time for the holiday season (presuming Black Friday too?)
Funny anecdotal story. Locally in store there’s plenty of Christmas trees in Chicago costco. However we couldn’t fit it in our car so we decided to buy online. My old zip code in CA is completely sold out of Christmas trees for online. I changed the zip code to Chicago and they were all sold out BUT the one we wanted. Got lucky but online does seem to be out of Christmas trees.
My wife just came back from our local COST. We’re a smaller market but she said inventory levels were some of the best she’s seen in awhile. They even had pallets of TP! She picked up Christmas garland and a few other items. She didn’t see shortages of any of the staples.
Here’s some historical data I found around earnings.
Costco Wholesale (COST) Historical Moves Ahead of Earnings
COST stock had mixed performance leading up to earnings. Shares of Costco Wholesale traded lower, on average, in the two weeks and one day periods heading into an earnings report. The best performance was three days ahead of earnings for an average gain of 0.3%
COST shares have moved lower in the immediate aftermath of earnings 8 out of 12 previous reports. On average the stock moved down -0.6% in the first day of trading after the company reported earnings.
Costco Wholesale (COST) Stock Behavior After Earnings
Based on the previous 12 earnings releases, COST is more likely to trade lower 1 day after earnings for an average loss of -0.4%
I’m going to look up some more information this weekend. The stock held up comparatively well during todays Covid Variant news. In the AH its down .7% at 545.89. Cost did really during COVID, but I’m not sure how this will effect stock in the short term.
Yea I def think I will sell before earnings gets released depending upon how it trends. Hate my wife for it but we have to go to Costco this morning so I will report back what I see and talk to some management about supply.
Went today and everything was fully stocked. More than usual. Staff said they haven’t seen any issues with things being short but I couldn’t get a manager this time. Will try calling during the week. I will add and condense a lot in a few more posts.
But notice the calls were more money than the puts lol. Love these articles that are usually bearish sided but we also can’t be overly confident. This play has given 50% profit about 3 times since this DD was created. I bought the bottom a few times today but very risky with the market right now.
I was at Costco tonight and did not see any inventory issues. Store was the usual busy. Seemed like less workers and aisles open then I normally see but it seems like they are in a good spot overall.
Costco reports its November sales tomorrow at 4:15 est. The stock has reacted with some strong positive movement following the last two sales reports. Both October and September were positive and I’ve found nothing to suggest November will be otherwise.
November 3 (October Sales)
Closing price: 502.33
Report net sales 16.27 Billion, 19.2% increase from 2020.
11/4
Open: 507.01 (+0.93%)
High: 520.21 (+3.56%)
Close: 515.62 (+2.65%)
October 6 (September Sales)
Closing price: 449.34
Report net sales 19.50 billion, 15.8% increase from 2020
10/7
Open: 456.47 (+1.59%)
High: 459.59 (+2.29%)
Close: 452.87 (+(.79%)
This may be completely irrelevant given the Covid situation, maybe Costco tanks alongside everything else.
Either way, I’ll be interested to see how this report affects the price AH tomorrow.
i noticed that too lol. the headline seemed bearish but more OI on the call side. i’ve been “scalping” ITM calls and been paying off but yesterday the fed news left me with a bad entry - though i bought the low. but my expiry is 12/17 and given the DD and all the anecdotal evidence still very bullish. hopefully SPY cooperates or at least stays neutral till earnings.
