From Nasdaq: 2024-04-30 04:30:00

Costco (NASDAQ: COST) has been a resilient retail stock since its 1985 IPO, turning a $1,000 investment into over $436,600 despite market challenges. Reasons behind its premium valuation include membership growth, expanding brick-and-mortar presence, consistent comps growth, and stabilizing margins.

Costco’s low margins are offset by high-margin membership fees, with 132 million cardholders and a 90.5% worldwide renewal rate in Q2 of fiscal 2024. The company continues to expand its warehouse count and overseas presence, strengthening its competitive edge against e-commerce and other warehouse retailers.

Despite pandemic-driven growth slowdown, Costco’s comps growth is stabilizing with Canada, other international, and e-commerce segments showing accelerated growth in fiscal 2024. Analysts expect revenue to rise 5% in 2024 and 7% in 2025, outpacing big box retailers like Walmart and Target.

Stabilizing margins in fiscal 2023 and a gross margin expansion in fiscal 2024 demonstrate Costco’s ability to adapt to changing market conditions. Expected fee hikes and improved operational efficiency should further boost margins and drive earnings growth in the coming years.

While Costco’s stock may seem expensive, its strong business fundamentals and growth prospects make it a solid long-term investment. Investors should consider the advice of financial experts before making a decision, such as the recommendations provided by The Motley Fool Stock Advisor team.

(Editor’s note: The author of this article has positions in Amazon. The Motley Fool has positions in Costco Wholesale, Target, and Walmart.)



Read more at Nasdaq: 4 Reasons to Buy Costco Stock Like There’s No Tomorrow