COST - Costco Wholesale Corporation
281.34 -0.22 (-0.08%)
After hours: 7:30PM EDT
| Previous Close | 280.65 |
| Open | 281.05 |
| Bid | 281.04 x 800 |
| Ask | 281.55 x 1000 |
| Day's Range | 280.24 - 282.82 |
| 52 Week Range | 189.51 - 282.82 |
| Volume | 1,479,451 |
| Avg. Volume | 1,658,198 |
| Market Cap | 123.827B |
| Beta (3Y Monthly) | 1.02 |
| PE Ratio (TTM) | 34.60 |
| EPS (TTM) | 8.14 |
| Earnings Date | Oct 3, 2019 |
| Forward Dividend & Yield | 2.60 (0.93%) |
| Ex-Dividend Date | 2019-05-09 |
| 1y Target Est | 262.36 |
- InvestorPlace•10 hours ago
Collect Another Round of Income on Costco
To receive further updates on this Costco Wholesale Corporation (NASDAQ:COST) trade as well as an alert when it's time to take profits, sign up for a risk-free trial of Strategic Trader today.This morning, we're recommending another bullish put write on Costco Wholesale Corporation (NASDAQ:COST).Yesterday, we told you about an opportunity to trade on The Walt Disney Company (NYSE:DIS) before it reports earnings in August. We like to avoid holding trades through a company's earnings report to limit our risks.InvestorPlace - Stock Market News, Stock Advice & Trading TipsLast week, we recommended a trade on COST for similar reasons. COST, like most retail stocks, reports much later in earnings season.In the time since we recommended a put write on COST, the stock has risen to just above $280. We were able to buy back our COST August 2nd $267.50 put writes and lock in our profits.Now, we're looking to collect even more income from COST. Consumers are Strong Despite Trade WarDespite some softness in the economy, the U.S. consumer is still looking very solid. We want to maintain exposure to retail stocks through COST because it's been performing so well. We may start to look at other consumer stocks in the short term.COST has noted in the past that the trade conflict with China will lead to higher prices. And now that tensions are escalating again, that could affect the COST's share price.Higher prices would theoretically lead to lower sales. Eventually, that would cut into COST's profits.However, when we look at the technical picture, we're fairly optimistic. COST and other big retailers like Walmart, Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT) might be big enough to escape this situation relatively unaffected. New All-Time HighCOST broke above resistance at $270 last week, and this week, it set a new all-time high at $281.37. The stock started to turn around yesterday, and it may be encountering some resistance. As it comes back down, we'll want to look for signs of support.Daily Chart of Costco Wholesale Corporation (COST) -- Chart Source: TradingViewCOST won't report earnings until October, which means we can safely sell options that expire in August without risk of holding through earnings.The $270 level may act as support, but it's also possible options with a strike at that level won't provide much premium. We don't expect much of a pullback from COST, so a put write with a strike at $275, between support and resistance, seems like the best way to generate income without taking on too much risk.To find out which COST puts we're selling -- and to get access to our full portfolio of income-generating trades -- consider signing up for risk-free trial subscription to Strategic Trader today. InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of Strategic Trader.The post Collect Another Round of Income on Costco appeared first on InvestorPlace.
- American City Business Journals•13 hours ago
These are the best employers in Arizona, according to Forbes
Costco isn't just the go-to place for Valley residents and businesses to buy in bulk — the wholesale retailer also is Arizona's best employer, according to a recently published ranking. Forbes has released its inaugural lists of "America's Best Employers by State." At the top of Arizona's list is Costco Wholesale Corp. (Nasdaq: COST), the Issaquah, Washington-based retailer that boasts 245,000 employees companywide. In total, 72 companies were ranked in Arizona.
Motley Fool•yesterdayCostco Stock Is Too Hot to Handle, Despite June Sales Beat
The top warehouse club operator continues to post strong sales growth, but Costco stock is too expensive at its current valuation of 35 times earnings.
Motley Fool•yesterday2 Stocks Hitting All-Time Highs
Roku and Costco are firing on all cylinders -- and their stocks are soaring.
- Bloomberg•yesterday
Searches for ‘Canceling Amazon Prime’ Spike on Prime Day
(Bloomberg) -- Internet searches for “Canceling Amazon Prime” were 18 times higher on Monday -- the beginning of Amazon.com Inc.’s two-day sale -- than the previous day, according to search intelligence firm Captify. The data suggest shoppers want to snatch up discounted gadgets and appliances without making a long-term commitment to the world’s biggest online retailer.“If Amazon is hoping to use Prime Day as a way to sign up and retain new Prime members, they might need to rethink their retention plan,” Captify said in a statement. “According to search, consumers are signing up for Prime, getting their deals and then canceling membership shortly after.”Shoppers are projected to spend $5.8 billion on Amazon over the two days, according to an estimate from Coresight Research. The e-commerce giant launched Prime Day in 2015 as a way to lure new Prime members, who pay fees in exchange for shipping discounts and other perks like video streaming.Analysts estimate Amazon’s Prime member retention rate is more than 90%, better than Costco Wholesale Corp. The Seattle-based company has used a variety of tactics to try to find additional subscribers. For example, Amazon offers monthly memberships to attract those who don’t want to join for a year.The average Prime member spends $1,400 a year on Amazon, more than double the $600 spent by shoppers who aren’t Prime members, according to Consumer Intelligence Research Partners. The firm estimates Amazon has 103 million Prime members in the U.S.Captify based its estimate on searches by 2.2 billion global consumers using computers, voice-activated devices and smartphone apps. The search metrics include sites like Reddit and deal hunting websites that have discussion forums where shoppers swap knowledge about the best prices, said Rohaan Dullabhai, a senior insight strategist at Captify.Searches for Best Buy Co. were up 255% from the day before Prime Day, while Walmart Inc. queries climbed 130% and EBay Inc. searches rose 72%. That suggests shoppers are bouncing from one site to another in search of the best deal before subscribing to Amazon Prime, he said."Consumers are becoming more and more savvy," Dullabhai said. "They are going to the discussion forums to find the best deals and taking advantage of all of these retailers competing with one another."(Updates with search information about retailers in seventh paragraph.)To contact the reporter on this story: Spencer Soper in Seattle at ssoper@bloomberg.netTo contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Alistair BarrFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Investopedia•yesterday
Costco Investors Have Been Buying Shares in Bulk
Strong growth metrics alongside unusual accumulation signals suggest more upside ahead for Costco shares.
- TipRanks•yesterday
Goldman Sachs: 3 Big Box Retailers Primed for Gains
We hear so much about online retail that it’s easy to lose sight of some important facts: brick-and-mortar stores aren’t going to disappear completely. Customers still like to walk inside, pick up the floor model, or watch a real-life demonstration. While online retail offers convenience, brick-and-mortar offers experience.In 2018, physical retailers brought in $714 billion in sales, a 3.2% increase from 2017, compared to $679 billion in annual online retailer sales. Online’s faster growth rate, 9.6% from 2017, shows that it will soon take the lead, but brick-and-mortar’s sheer size makes a strong case for permanence.Three major big-box style retailers have recently gotten the thumbs-up from Goldman Sachs. Let’s unpack the TipRanks data, and find out why. Costco Corporation (COST)Costco has taken the club-model big-box warehouse store to its greatest success. The retailer has over 100 million members, with a 90% resubscription rate. While club membership is required to shop, Costco has benefits from high levels of repeat visits and bulk purchases; its membership shops frequently and buys a lot. The warehouse-floor layout of the stores helps keep down overhead and stocking costs, while offering high volume keeps prices down for customers.This successful model, in a colorful comparison by five-star financial blogger Luke Lango, has created an “offline version of Amazon (AMZN)… [The] loyal membership base will continue to power healthy results for the retailer for the foreseeable future…” Those results have pushed COST shares well above their average price target, prompting top analysts to reevaluate the stock in the past week.Goldman’s five-star analyst Kate McShane initiated her coverage on COST on July 11 with a buy rating and price target of $290, saying, “The club model continues to have some of the best attributes within retail.” Her target suggests a 3.36% upside to the stock’s current price; at the time she set it, the upside was almost 5%.COST has been on an upward surge as the analysts have been raising their price target on the stock. To give two examples, Loop Capital’s Laura Champine bumped her target to $300 “after [COST’s] June comps data and the encouraging sequential improvement in traffic growth in May…” while Baird’s Peter Benedict set a $290 target, saying, “[COST] is a growth staple as management continues to boost its competitive position.”Costco’s analyst consensus rating is a moderate buy, based on 9 buys and 5 holds assigned in the last three months. As mentioned above, the stock’s share price has powered through the average price target in recent trading sessions. Market analysts have begun setting new targets in the $290 to $300 range, but the average remains at $269. A $290 target will give the stock a 3.36% upside.>>Click Here to see the full list of Analyst Ratings Target Corporation (TGT)Goldman gives its best rating to Target, adding the stock to its Americas Conviction buy list. Target has been posting excellent comp sales growth in recent quarters, along with fast growth of the store’s online segment. Looking forward, Target’s upfront costs on store improvements and online initiatives will start to drop in the next few quarters, giving the company an additional boost to the bottom line.This is the background that sparked McShane’s interest in the stock, getting her to start coverage with a $102 price target. In her research note, she says, “Target is starting to benefit meaningfully from door closures, and an inflection in operating income growth should drive accelerating earnings growth.” Her price target suggests an upside of 17.5%.McShane is not the only analyst taking a favorable view of Target. After the Q1 earnings, JPMorgan’s Christopher Horvers set a $100 price target and buy rating on the stock, saying, “Target’s 4.8% comps is one of the best so far in large cap retail’s first-quarter.” Horver’s target implies a 15% upside potential for TGT.Target maintains a moderate buy from the analyst consensus, based on 6 buys and 7 holds. Shares are selling for $86.80, so the average price target of $89.18 indicates a modest 2.74% upside potential.>>Click Here to see the full list of Analyst Ratings Walmart, Inc. (WMT)Sam Walton’s retail giant has been having a good year. WMT stock is up 23% year-to-date, a solid performance built on a foundation similar to Target’s. Walmart has been streamlining in-store operations, improving reshelving and stocking times along with face-to-face customer service. The store improvements have gone hand-in-hand with an e-commerce initiative. In a creative twist, Walmart leveraged its existing network of stores to cut delivery costs from the online end – customers can purchase online, and pick-up at the store. It’s a viable and convenient option, given that almost everyone in America lives within 10 miles of a Walmart location.The company’s self-reinvention prompted McShane to note WMT’s improved same-store comp sales and traffic growth. As with Target, she also noted that the company faced front-loaded expenses when implementing the changes, but as those expenses moderate profits will improve. She believes WMT stock will continue its upward trend, and sets a $123 price target as she initiates coverage. Her target shows confidence in a 7% upside.Walmart has been attracting positive analyst attention for the past month and more. On June 24, KeyBanc’s Edward Yruma noted Walmart’s acquisition of the PhonePe P2P money transfer app, and specifically pointed out a potential $14 billion valuation in the medium term. He raised his price target by 4%, to $125, and reiterated his “continued confidence in WMT’s ability to innovate.” His price target indicates an upside of 8.7%.Overall, WMT gets another moderate buy from the analyst consensus, based on 9 buys, 2 holds, and 1 sell rating. The stock’s average price target of $115.33 gives a mere 0.3% upside to the current price of $114.98, but with analysts improving their ratings and raising targets, that upside may increase in coming weeks.>>Click Here to see the full list of Analyst RatingsThe retailers detailed here fall into two patterns for success: the warehouse membership model, and the traditional retail model with improvements. Both are viable paths to corporate success and returns for investors.Visit TipRanks’ Top Analysts page, to learn more about Wall Street’s best market watchers.
- Simply Wall St.•yesterday
Costco Wholesale Corporation (NASDAQ:COST): Has Recent Earnings Growth Beaten Long-Term Trend?
Today I will take a look at Costco Wholesale Corporation's (NASDAQ:COST) most recent earnings update (12 May 2019) and...
- Markit•yesterday
See what the IHS Markit Score report has to say about Costco Wholesale Corp.
Costco Wholesale Corp NASDAQ/NGS:COSTView full report here! Summary * Perception of the company's creditworthiness is negative * Bearish sentiment is low * Economic output in this company's sector is expanding Bearish sentimentShort interest | PositiveShort interest is extremely low for COST with fewer than 1% of shares on loan. This could indicate that investors who seek to profit from falling equity prices are not currently targeting COST. Money flowETF/Index ownership | NeutralETF activity is neutral. ETFs that hold COST had net inflows of $10.74 billion over the last one-month. While these are not among the highest inflows of the last year, the rate of inflow is increasing. Economic sentimentPMI by IHS Markit | PositiveAccording to the latest IHS Markit Purchasing Managers' Index (PMI) data, output in the Consumer Services sector is rising. The rate of growth is strong relative to the trend shown over the past year. Credit worthinessCredit default swap | NegativeThe current level displays a negative indicator. COST credit default swap spreads are near their highest levels for the past 1 year, which indicates the market's more negative perception of the company's credit worthiness.Please send all inquiries related to the report to score@ihsmarkit.com.Charts and report PDFs will only be available for 30 days after publishing.This document has been produced for information purposes only and is not to be relied upon or as construed as investment advice. To the fullest extent permitted by law, IHS Markit disclaims any responsibility or liability, whether in contract, tort (including, without limitation, negligence), equity or otherwise, for any loss or damage arising from any reliance on or the use of this material in any way. Please view the full legal disclaimer and methodology information on pages 2-3 of the full report.
- Benzinga•yesterday
'Fast Money' Traders Talk Retail: Costco, Target And More
Guy Adami said on Monday's " Fast Money " he likes Costco Wholesale Corporation (NASDAQ: COST ) after hitting an-all time high. He also says Home Depot Inc (NYSE: HD ) is Amazon.com, Inc. (NASDAQ: ...
- GuruFocus.com•2 days ago
The Price of Knowledge
We will hypothesize on knowledge we believe is well known and overpriced and on what isn’t well known or well believed and could be underpriced Continue reading...
- Zacks•2 days ago
Amazon Prime Day 2019: What Does This Mean for the Company Moving Forward?
Amazon (AMZN) kicked off its annual Prime Day Monday, exclusively offering a vast variety of deals for its Prime members.
- Bloomberg•2 days ago
Amazon Shoppers Snatch Up Deals on Potato Chips and Toilet Paper
(Bloomberg) -- Amazon.com Inc. shoppers are snatching up potato chips, crackers, toilet paper and other non-perishable grocery store items to take advantage of the online retailer’s Prime Day deals, which could be bad news for Costco Wholesale Corp. and Walmart Inc.Sales of consumable products on Amazon during the first nine hours of Prime Day -- a two-day sale that began Monday -- are about triple what they are on a typical sales day, according to CommerceIQ, which helps hundreds of consumer brands sell products on the e-commerce site.The results show Prime Day’s appeal stretches beyond electronics, appliances and other big-ticket purchases shoppers usually put off until there’s a big promotion. Sales of car seats, appliances and toys were up four to five times a typical day, according to CommerceIQ, which is about the usual rate for a sales event.Shoppers will spend $5.8 billion on Amazon over the two days, according to an estimate from Coresight Research. That’s an 11% increase from last year’s 36-hour sale when converted to spending per hour. Amazon launched Prime Day in 2015 as a way to lure new Prime members, who pay monthly or yearly fees in exchange for shipping discounts and other perks like video streaming.The uptick in spending shows Amazon Prime Day continues to have strong appeal to shoppers despite competing sales events offered by rivals from Walmart to Target Corp. and EBay Inc.Amazon doesn’t disclose specific sales information about Prime Day. Some companies are able to gain insights through their own sales on the site or estimations based on sales rankings and other information Amazon discloses.To contact the reporter on this story: Spencer Soper in Seattle at ssoper@bloomberg.netTo contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Andrew PollackFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- InvestorPlace•2 days ago
7 Stocks Being Inflated by Low Rates
Arguably the single biggest theme and driver of the record 2019 stock market rally has been the plunge in interest rates. In short, as interest rates rose in late 2018, stocks fell off a cliff, and as interest rates have plunged in 2019, stocks have come roaring back.Why have interest rates and stocks been inversely correlated? In depth, it's a complicated conversation. But the high level ideas are easy to digest.There are two things at play here. One, bonds and stocks are competing investment vehicles. Money all around the world has to constantly decide whether to be invested in stocks, or bonds. When interest rates drop, bond yields drop and the return on bonds becomes less attractive relative to stocks. Thus, money rushes into stocks. Further, because bond yields are lower, that gives wiggle room for stock yields to go lower, too, so the multiple on stocks can and should move higher in a low rate environment.InvestorPlace - Stock Market News, Stock Advice & Trading TipsTwo, the theoretical present value of a stock is the net present value of its future profits, discounted back by a certain discount rate. One of the principal components which influences that discount rate: the risk free investment rate (which is a byproduct of current interest rates). Thus, as interest rates drop, the risk free investment rate drops, the discount rate on future profits drops and the present value of equities rises.Consequently, it is reasonable to say that low rates today are inflating equity valuations everywhere.This is especially true for certain stocks which seem a too inflated by low rates. For these stocks, if/when rates rise, their present valuations could crumble, and the stocks could fall off a cliff. * 7 Dependable Dividend Stocks to Buy With that in mind, let's take a look at 7 stocks that seem overly inflated by low interest rates. Stocks Being Inflated By Low Rates: Proctor & Gamble (PG)Source: Mike Mozart via Flickr (Modified)YTD Gain: 24%Forward P/E Multiple: 24Long Term Projected EPS Growth Rate (sourced from YCharts, for all stocks): ~7%Consumer staples giant Proctor & Gamble (NYSE:PG) has rallied 24% year-to-date, generating 4 points of alpha on the S&P 500, mostly thanks to the plunge in interest rates. In short, PG is a defensive story with a big yield. Defensive stories tend to have low multiples, so when rates fall, these defensive stories can benefit from big multiple expansion. At the same time, big yield stocks become relatively more attractive in low rate environments, since healthy risk free yield is hard to find.But at current levels, PG stock has nearly the same forward earnings multiple as Facebook (NASDAQ:FB). Facebook is a 20%-plus revenue grower. Proctor & Gamble grew revenues by 1% last quarter (5% on an organic basis). Over the next several years, this company projects as a mid single digit profit grower. A 24 forward multiple is simply too steep for mid single digit profit growth, especially considering the entire consumer staples sector trades at less than 20-times forward earnings for a similar long term earnings growth rate.Net net, PG stock has been overly inflated by low rates, and if/when low rates do creep higher, PG stock could drop in a big way as the multiple compresses to more reasonable levels. Stocks Being Inflated By Low Rates: Match Group (MTCH)YTD Gain: 67%Forward P/E Multiple: 40Long Term Projected EPS Growth Rate: ~15%Shares of global internet dating behemoth Match (NASDAQ:MTCH) have rattled off a near 70% gain through the first six months of 2019, as low rates have supported multiple expansion on the stock while the company has continued to report strong subscriber growth numbers which underscore that online dating is a growing global phenomena. This is nothing new for MTCH stock. Over the past three years, the stock is up nearly 400%.The secular growth narrative here is healthy. Dating, like shopping and TV watching, is moving to the online channel. Match is the dominant player in this market, having bought up pretty much all the competition and controlling a suite of dating apps which together comprise the lion's share of the online dating market. This dynamic of leadership in a secular growth market implies that Match will continue to report robust subscriber, revenue, and profit growth for the foreseeable future.But robust here needs an asterisk. Subscriber, revenue, and profit growth growth were all in the low to mid teens range last quarter. Going forward, analysts project this as a mid teens profit grower. MTCH stock trades at 40-times forward earnings. That's a steep multiple for 15% profit growth. The info tech space broadly trades at half that multiple for roughly the same long term profit growth rate. * 5 EV Stocks to Buy for Big Gains Over the Next Decade Consequently, MTCH stock -- while supported by secular growth tailwinds -- seems to be overly inflated here by low rates. Stocks Being Inflated By Low Rates: Chipotle Mexican Grill (CMG)YTD Gain: 71%Forward P/E Multiple: 57Long Term Projected EPS Growth Rate: ~20%Year-to-date, Mexican fast casual eatery Chipotle Mexican Grill (NYSE:CMG) has been one of the S&P 500's top stocks, rising more than 70% through the first six months of 2019. The catalyst behind the rally has been acceleration of Chipotle's operational recovery. Expansion of the digital business, new menu additions and aggressive health-oriented marketing have driven Chipotle's recovery into the next-gear, with comps and margins flying higher. Investors keep buying into this recovery narrative, and Chipotle stock keeps moving higher.But the valuation on CMG stock now makes no sense, unless interest rates remain depressed forever. CMG stock trades at nearly 60-times forward earnings, roughly three times the projected long term EPS growth rate of 20%. Realistically, I actually think Chipotle can do better than 20% EPS growth, and think EPS can land around $40 by 2025 (nearly 25% annualized growth). But based on a restaurant average 27 forward multiple and 10% discount rate, $40 EPS by 2025 supports a 2019 price target for CMG stock of just $670.Chipotle stock trades hands today north of $700. Thus, this stock appears to be overly inflated by presently low interest rates. Stocks Being Inflated By Low Rates: Starbucks (SBUX)Source: Shutterstock YTD Gain: 38%Forward P/E Multiple: 32Long Term Projected EPS Growth Rate: ~15%Shares of coffee retail giant Starbucks (NASDAQ:SBUX) have rallied 38% in 2019, nearly double the return of the S&P 500, as investors have grown more optimistic regarding the company's long term growth trajectory in China and as operations domestically have shown signs of improving.But traffic trends in the U.S. are still negative, competition is still ramping, traffic trends everywhere else are slowing, overall comparable sales growth is slowing from its multi-year trend, margins aren't moving higher, and -- despite all that -- SBUX stock now trades at its biggest forward earnings multiple (32) since 2015, when the company's internal growth rates were much higher. * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip Indeed, 32-times forward earnings seems like a steep price to pay for low to mid single digit comparable sales growth, mid to high single digit revenue growth, flattish margins and mid teens profit growth. As such, it is reasonable to say that the current valuation underlying SBUX stock is sustainable if and only if interest rates remain low. As soon as they move higher, the multiple will compress and the stock will drop. Stocks Being Inflated By Low Rates: Under Armour (UAA)Source: Shutterstock YTD Gain: 49%Forward P/E Multiple: 77Long Term Projected EPS Growth Rate: ~30%Athletic apparel company Under Armour (NYSE:UAA) has been one of the market's hottest stocks in 2019, rising nearly 50% through the first six months of 2019 as athletic apparel demand trends have remained favorable, and Under Armour's growth and margin trends have improved against the backdrop of falling inventory (which is usually a solid leading indicator in the retail space).But UAA stock now trades at nearly 80-times forward earnings. Sales growth last quarter was 3%. The quarter before that it was 3%. Sure, margins are moving higher here, and top-line growth rates may improve as Under Armour pushes a more relevant product line-up over the next few quarters. Still, at best, this is a 20-30% profit grower over the next few years. Extrapolating that out, Under Armour will probably wind up with around $1.50 in EPS by fiscal 2025. Based on a long term average Nike-type forward multiple of 25 and a 10% discount rate, that equates to a 2019 price target for UAA stock of $23.Under Armour stock presently trades hands around $26. Thus, the current valuation seems overly inflated by low rates. Stocks Being Inflated By Low Rates: Costco (COST)Source: Shutterstock YTD Gain: 35%Forward P/E Multiple: 34Long Term Projected EPS Growth Rate: ~10%Shares of warehouse retailer Costco (NASDAQ:COST) have marched higher in 2019, to the tune of a 35% year-to-date gain, as the company has benefited from continued strong domestic consumer spending trends, especially in the discount segment, and as low rates have helped support multiple expansion in COST stock.At the present moment, both of those tailwinds will continue. Consumer economic fundamentals remain healthy, characterized by low unemployment, big wage gains, low consumer debt levels, and good credit. Meanwhile, rates project to remain low for the foreseeable future, as the Fed has embraced a rate cut mentality. The combination of those two dynamics should allow COST stock to keep moving higher. * 3 Breakout Stocks to Buy But it's also worth noting that the stock is trading at a decade high valuation despite the growth profile remaining largely unchanged. That dynamic is sustainable only if rates remain low. As soon as they start creeping higher, COST stock could feel some pressure. Stocks Being Inflated By Low Rates: Wingstop (WING)YTD Gain: 48%Forward P/E Multiple: 130Long Term Projected EPS Growth Rate: ~20%One of the hottest stocks in the market both this year and over the past several years has been chicken wing restaurant operator Wingstop (NYSE:WING). Year-to-date, WING stock is up nearly 50%. Over the past three years, the stock is up 270%. The big rally can be attributed to Wingstop's consistently positive comparable sales growth trajectory, which has coupled with huge unit growth rates and healthy margin expansion to produce second-to-none profit growth in the restaurant industry.But despite the company's strong growth track record, promising future growth potential, and tasty chicken wings, valuation is a serious issue for WING stock. The stock trades at 130-times forward earnings. That's is the most expensive multiple I have ever seen in the restaurant category. Further, Wingstop isn't growing that fast. Revenue rose 16% last quarter, and EBITDA rose 11%. Those are tiny growth rates next to a triple digit forward earnings multiple.As such, it is very reasonable to say that WING stock's present valuation is being overly inflated by low rates. Once rates start creeping up, WING stock will likely drop in a big way.As of this writing, Luke Lango was long FB. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Dependable Dividend Stocks to Buy * 10 Stocks Driving the Market to All-Time Highs (And Why) * 7 Short Squeeze Stocks With Big Upside Potential The post 7 Stocks Being Inflated by Low Rates appeared first on InvestorPlace.
- InvestorPlace•2 days ago
9 Retail Stocks Goldman Sachs Says Are Ready to Rip
Retail stocks have been a tough trade in 2019. While the S&P 500 is up nearly 20% year-to-date, the SPDR S&P Retail ETF (NYSEARCA:XRT) is up just 3%, as retail stocks have been weighed by sluggish consumer spending in early 2019 and overarching trade conflicts. The sum of those headwinds has weighed on revenues and margins, and profit growth rates in the consumer discretionary sector actually dropped into negative territory in the first quarter of 2019, while S&P 500 earnings rose 4%.But, Goldman Sachs thinks things are about to get a whole lot better for a whole lot of retail stocks.The thesis?InvestorPlace - Stock Market News, Stock Advice & Trading TipsGoldman Sachs believes that: 1) the macro consumer economic environment is improving, supported by low unemployment and strong wage gains, and that such improvement will re-accelerate retail revenue growth rates; 2) trade issues are being overblown in the near term and have a chance to cool off in the medium to long term; and 3) after years of investing into their e-commerce operations, big box retailers are ready to reap the operating income growth rewards of those investments. * 10 Stocks Driving the Market to All-Time Highs (And Why) Owing to these three core beliefs, Goldman Sachs has a Buy rating on several retail stocks. Which stocks made the cut? And will those stocks actually outperform from here? Let's take a closer look at nine retail stocks that Goldman thinks are ready to rally. Target (TGT)Source: Mike Mozart via Flickr (Modified)The Bull Thesis: Goldman's top pick is Target (NYSE:TGT), and the thesis here is pretty straight-forward. Target has invested big into its e-commerce and omni-channel business over the past few years. Now, the company's e-commerce business is the fastest growing online retail business among big name retailers, and Target's comparable sales growth has also been among the best in the business over the past few quarters. Thus, these investments are paying off in the form of supercharged top-line growth. Over the next few quarters, the cost base from these investments will start to moderate, too, and supercharged revenue growth will be accompanied by supercharged profit growth. That profit growth will converge on a reasonable valuation (14-times forward earnings) to spark a nice rally in TGT stock.Does It Hold Water? Yes. TGT stock is one of my favorite retail stocks for the foreseeable future, too, because this company is firing on all cylinders, continues to be relentlessly innovative, has big profit growth potential in the medium term, and continues to trade at a relatively discounted valuation. That combination ultimately implies that Target stock has runway to move higher over the next few quarters. Costco (COST)Source: Shutterstock The Bull Thesis: Another big box retailer that Goldman is bullish on is Costco (NASDAQ:COST). Much like Target, the bull thesis on COST stock is pretty straightforward, too. With Costco, you have the offline version of Amazon (NASDAQ:AMZN), which has leveraged low price appeal to create a huge base of loyal Costco members that shop at Costco often and in heavy volume. That loyal membership base will continue to power healthy results for the retailer for the foreseeable future, so long as consumer economic conditions remain favorable. If they do, those healthy results will in turn continue to drive COST stock higher. * 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond Does It Hold Water? Yes. But, with one important catch: valuation. Unlike other retail stocks on this list, COST stock isn't dirt cheap. Instead, it's the opposite of dirt cheap. It's an expensive stock, at 34-times forward earnings for what projects as a 10% profit grower over the next several years. That isn't a terribly attractive combination, so in the the near term, valuation friction may limit further gains in COST stock. Walmart (WMT)Source: Shutterstock The Bull Thesis: Goldman is also bullish on the 800 pound gorilla in the retail world: Walmart (NYSE:WMT). The Walmart thesis is very similar to the Target thesis. Walmart has aggressively reinvented itself over the past several years as an omni-channel retailer with a red-hot e-commerce business, enhanced in-store presentations and multiple omni-channel capabilities like "buy online, pick up in store". This reinvention has powered decade-best comparable sales and traffic growth at Walmart over the past few quarters. But, this reinvention has also been expensive, and weighed on margins. Going forward, the cost base from these investments should moderate, and robust profit growth should come back into the picture. As it does, WMT stock should trend higher.Does It Hold Water? Yes. Much like TGT stock, WMT stock will head higher over the next few quarters as robust revenue growth and margin improvement will converge on a still reasonable valuation (23-times forward earnings) to drive share price out-performance. Home Depot (HD)Source: Shutterstock The Bull Thesis: In the home improvement space, Goldman is bullish on shares of Home Depot (NYSE:HD). Home improvement market fundamentals are favorable, driven by low rates, low unemployment, strong wage gains and good credit. Home Depot is the leader in this market, and has been for some time. As such, as home improvement spend increases over the next few quarters, Home Depot's growth rates should move higher. As those growth rates move higher, HD stock should trend higher, too. * 7 Dependable Dividend Stocks to Buy Does It Hold Water? Yes. The valuation supporting HD stock remains reasonable, as the stock trades at just 21-times forward earnings for what projects as roughly 10% profit growth over the next several years. That favorable valuation, coupled with favorable market fundamentals and continued strong numbers, will keep HD stock on a healthy uptrend for the foreseeable future. Lowe's (LOW)Source: Mike Mozart via Flickr (modified)The Bull Thesis: Goldman likes home improvement retailer Lowe's (NYSE:LOW), too, for the same reasons they like Home Depot. The home improvement market is supported by strong fundamentals at the current moment. Over the next few quarters, those strong fundamentals should drive higher home improvement spend. Some of that spend will land at Home Depot. Some of it will land at Lowe's. As such, Lowe's growth trend should improve into the back half of 2019. As it does, LOW stock should move higher.Does It Hold Water? Yes. LOW stock was unfairly beaten up in May on margin concerns in its Q1 earnings report. But, those margin headwinds are ephemeral, and should ease going forward. As they do, that easing will couple with strong top-line momentum (Lowe's also reported its best comp in recent memory last quarter) to produce robust profit growth. Simultaneously, LOW stock trades at a discount relative to HD stock (19-times forward earnings for LOW, versus 21-times for HD). This relative discount plus strong profit growth should equal big returns for LOW stock in the back half of 2019. BJ's (BJ)Source: Shutterstock The Bull Thesis: In the smaller cap retail world, Goldman is bullish on BJ's (NYSE:BJ). The bull thesis on BJ stock rests on two things. First, the macro consumer economic environment is improving, and supports strong consumer spend in the back half of 2019. Second, BJ's is a wholesale club retailer, and the club model of leveraging low price appeal to create a loyal membership base (from which you generate substantial revenue) is a winning model -- see Amazon and Costco. Thus, BJ's has a winning strategy in a market gaining momentum, and that implies healthy growth potential for BJ stock going forward. * 7 Companies Apple Should Consider Buying Does It Hold Water? Yes. BJ's is basically like a mini-Costco with an East Coast focus and very low prices, meaning that this warehouse retailer has cut out a sustainable niche for itself in the discounted retail segment. Further, BJ stock trades at just 15-times forward earnings (versus a 34-times forward multiple for COST), so there's substantial room for multiple expansion here in the event that BJ's continues to report healthy numbers (which it should). O'Reilly Automotive (ORLY)Source: JJBers via Flickr (modified)The Bull Thesis: Goldman also has a buy rating on O'Reilly Automotive (NYSE:ORLY). O'Reilly Automotive is an auto parts retailer which has grown revenues at a fairly steady mid-single-digit rate for the past several years, during which the auto parts market in the U.S. has grown at a low-single-digit rate. Because of this track record of above-market growth, Goldman likes ORLY stock in the back half of 2019, when the auto parts segment should benefit from increased demand as rates drop and the auto market rebounds.Does It Hold Water? Yes. So long as the U.S. consumer economy remains healthy and stable (as it projects to for the foreseeable future), then you can count on O'Reilly to deliver stable mid-single-digit revenue growth alongside gradual margin expansion. That combination on top of a 22-times forward multiple should produce healthy returns in ORLY stock going forward, especially with depressed interest rates broadly inflating equity valuations. Tractor Supply (TSCO)The Bull Thesis: Back to the home improvement world, Goldman also likes home improvement and agricultural goods retailer Tractor Supply (NASDAQ:TSCO). The bull thesis on TSCO is simple. Macro conditions in the home improvement and agriculture markets are favorable, and Tractor Supply's retail locations are largely rural and insulated from being disrupted by the big-box same-day-delivery push. This insulation coupled with favorable market conditions should drive sustained healthy profit growth over the next few years, and keep TSCO stock on a winning path. * 10 Stocks to Buy for Less Than Book Does It Hold Water? Yes. The valuation on TSCO stock, while not cheap, is certainly reasonable, at 23-times forward earnings for what projects as double-digit profit growth (comprised of mid-single-digit revenue growth and gradual margin expansion). So long as interest rates remain low, this combination of a ~20 forward multiple and ~10% profit growth should work for TSCO stock. Williams-Sonoma (WSM)Source: Mike Mozart via FlickrThe Bull Thesis: Tariff concerns have been a huge headache for Williams-Sonoma (NYSE:WSM), but Goldman thinks that the kitchenware and home furnishings retailer is ready to bounce back. Trade tensions are cooling, and with a truce on new tariffs between the two countries, it seems the worst of the trade war damage has already been inflicted. Going forward, the numbers here should get better, especially as buying conditions in the U.S. improve, too. This improvement should drive a nice rebound in WSM stock.Does It Hold Water? Yes. Of all the retail stocks on this list, WSM is among one of the cheapest, at just 13-times forward earnings. To be sure, that's because revenue growth and profit growth are relatively muted here (WSM projects as a mid single-digit profit grower). But, that growth trajectory could inflect higher as trade issues become old news. In the event that happens, sentiment will improve, and WSM stock will benefit from substantial multiple expansion.As of this writing, Luke Lango was long TGT, AMZN, WMT, HD and LOW. 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Up 35% YTD, Target Stock Is Still Undervalued
Target (NYSE:TGT) shares have been on fire in 2019. Shares in the retailer are up 35% year-to-date, from about $66 in January to approximately $87 today. While the stock continues to trade a lower valuation than its peers, investors have more confidence in its future prospects.Source: Shutterstock Regarding the future, Target faces many headwinds. The never-ending growth of Amazon (NASDAQ:AMZN), threatens the "big box" retail model. Within the big box realm, competition from Wal-Mart (NYSE:WMT) also threatens Target's long term prospects. * 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond But do not take the low valuation of TGT stock to mean weak prospects. Read on to find out why Target may still be a buy after a 35% rally.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Target's Strategy Is Paying OffPressure from Amazon has prompted Target and Wal-Mart to invest billions in order to stay relevant. As stated in their March 5, 2019 CFO presentation, after sales declines in 2016, Target was motivated to change course in order to resume growth.Unlike Wal-Mart's acquisition-driven strategy (Jet.com, Flipkart), Target focused on store reinvestment. The company remodeled stores, expanded their selection of owned and exclusive brands, and adapted to Amazon-related "same day delivery" pressures.In late 2017, Target acquired delivery service Shipt for $550 million. The Shipt purchase provided the infrastructure to offer same-day delivery in the majority of their stores. The success of this deal highlights Target's ability to remain relevant in an Amazon-dominated retail environment.Target's strategy has paid off. Comp sales and traffic were both up 5% in 2018. This indicates Target is making the right moves to protect their market share. Solid Future Prospects for TGTTarget's guidance calls for low-single digit sales growth in the next year. While this is not too exciting, it does indicate confidence Target can at least keep up in an increasingly e-commerce-driven retail environment.Target continues to expand in the e-commerce realm. Digital sales are up from $3.9 billion in 2017 to $5.3 billion in 2018.For brick and mortar stores, Target's "small format" strategy helps maintain market share. Opening smaller locations in affluent, densely populated areas maintains Target's image as the cosmopolitan big box store.Based on the Target CEO's presentation in March, Target has the highest concentration of small-format stores in the New York, Washington, D.C., Los Angeles, and San Francisco metro areas. Heavy presence in America's most affluent areas continues to be a positive factor in Target's future growth and profitability. Valuation: Target Stock Trades at a Discount to PeersTGT stock trades at lower earnings multiples than competitors Wal-Mart and Costco (NASDAQ:COST): * Forward P/E: TGT trades at 14x forward earnings. WMT trades at 22.5x forward earnings, and COST trades at 32.7x forward earnings. * EV/EBITDA (trailing 12 months): TGT's EV/EBITDA ratio is 8.4, while WMT and COST trade at EBITDA multiples over 10 (12.2 for WMT, 19.5 for COST).Despite this valuation discrepancy, TGT has higher EBITDA margins (10.1%) than both WMT (6.8%) and COST (4.2%), and has a net income margin of about 4.5% (compared to 1.6% for WMT, 2.4% for COST).The TGT stock discount continues to be a mystery. In a recent article, InvestorPlace contributor Will Healy pointed out a strong reason behind the discrepancy. With the failure of their Canadian expansion a few years back, Mr. Market still lacks confidence the company can continue to grow.But what Target lacks in "growth story," it makes up for in value. Not only is TGT stock undervalued relative to its peers; Target stock is a solid dividend play. TGT Continues to Be a Dividend AristocratTarget stock has paid a dividend since 1971. Not only that, the dividend has a 5-year CAGR of 9.79%.Compared to peers, TGT stock pays a higher dividend. Target's yield of 3% beats out WMT (1.8%) and COST (0.96%).Despite plowing billions of dollars back into the business, Target continues to make return of capital a high priority. In 2016 and 2017, the company bought back $3.2 billion worth of TGT stock. These buybacks helped boost EPS by about 8% (TTM EPS of $5.74, versus EPS of $5.32 in 2018).As stated in the CFO presentation, Target is committed to returning excess cash within the limits of their middle-A credit rating. This highlights Target's continued prudent capital allocation beneficial in the short-term (buybacks/dividends) and the long-term (store reinvestment). Bottom Line: TGT Stock Has Risks, But Is Still a BuyThe Amazon-driven "retail apocalypse" is a long-term risk to Target stock. But strategic moves are helping Target keep up in a tough retail environment.Despite solid earnings, TGT stock is still a bargain relative to peers. Add in a healthy buyback policy and high-yielding dividend, and Target stock offers investors a strong opportunity.Target's next earnings call is in August. Investors buying the stock today face the risk of priced-in expectations, and could see declines if earnings fail to excite investors.This makes Target stock a cautious buy. There may be better value purchasing shares down the road, but investors today may still want to initiate a position at the current price.As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities. 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