Opinions
Stockchase Insights
Costco Wholesale Corporation
COST-Q
HOLD
Jul 18, 2025
Stock price when the opinion was issued
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Likes the company, but has never owned the stock. It's always been screened out because of valuation. Trading today at 53x PE on this year's earnings. Great business model, and the street recognizes that.
You have to look at these companies in terms of what can go wrong. If we go into a sustained, negative economic period, there's going to be a lot of hurt on a company like this.
Sank 2.9% today one earnings. However, revenue, EPS and comp. sales beat. Are seeing more younger members. To combat tariffs, are altering their supply chain to hold down prices. It's absurd that the street is punishing them for disappointing renewal rates of online subscribers--this is an excuse to sell. Charlie Munger was a massive shareholder of COST. Over the last 20 years, has returned 19% annually--one of the best stocks ever--vs. 11% by the S&P. With this pullback, it is cheap.
COST is a large consumer staples name, but it trades at a high valuation of 49X forward earnings. Recently, we have been seeing large-cap names, particularly more stable and defensive names, being sold for higher-growth stocks, which helps to explain why the consumer staples, utilities, and healthcare sectors have been underperforming recently. We continue to like COST for a long-term holding, despite its high valuation, given its subscription model, consistency and execution. It may underperform in a strong bull market, but over a long-period of time, it has performed exceptionally.
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