Stockchase Opinions

Kash Pashootan Costco Wholesale Corporation COST-Q COMMENT Mar 14, 2017

One of the leaders in the low-cost space. Their margins run at about half of what their competitors do. That model only works if there is high turnover of your products. They have been successful in picking the right products, pricing them and moving them very quickly. The risk is, if you do get into a slowdown, there really isn’t any room to cut prices. They generate about 25% of revenue from membership fees, and with so many members, it is difficult to grow revenue. Membership fees are going up, which is a way to have that side of the business stay strong. Trading at about 29X Price to Earnings. For him, the dividend trajectory growth is not there, and trades too rich for him. Dividend yield of 1.1%.

$165.240

Stock price when the opinion was issued

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(Analysts’ price target is $1067.36)
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Managed to combine recurring revenue (membership fees) with traditional retail. Business model is still the best in the retail space. Big push toward lower-cost merchandisers. Second to none in its ability to not only survive, but thrive, in what could be a difficult economic environment. Yield is 0.48%.

(Analysts’ price target is $1063.88)
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Any time it opens up a store, it's successful. Model is easy to replicate in other countries. Exceptional customer loyalty. Produce will probably be impacted less by tariffs, as it's sourced locally; hardware goods may be impacted.

SELL

Recently sold. PEG ratio just got too high.

BUY

They will survive this tariff war, because they can source cheap, bulk products.

SELL

Great company and franchise, but valuation got expensive.

BUY ON WEAKNESS

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(Analysts’ price target is $1080.45)