Costco Post-earnings Update & Technical Analysis

Costco Post-earnings Analysis

Costco reported quarterly earnings after the bell Thursday and while profits exceeded estimates, their revenue didn’t come in line with expectations. The wholesale retailer generated revenue of $58.44B for the quarter, slightly below the expected $59.1B, but still an increase from last quarter’s numbers. Profits were also up to $3.92 per share, beating the $3.62 estimates. E-commerce was a highlight for the company as it reflected online growth by 18.4% YoY, helping them compete against Amazon and Walmart. All in all, Costco reported a strong quarter, but shares fell on the revenue miss. At these highs any scent of bad news can drive traders to take profits, but the general trend remains bullish so there’s a chance that buyers come in at this dip in the short term.

Looking at the long term, Costco has outpaced the S&P significantly this year so a correction is due. The company is trading at a 52 price to earnings multiple, significantly higher than competitors like BJ Wholesale Club, Walmart, and Target. A healthy P/E is usually between 15-25 so we’re looking at a significant correction on this name when markets correct overall. 

Technical analysis:

In the very short term, Costco may see some post-earnings activity that brings volatility. The after hour lows from Thursday were around 745.00 so we’ve placed a support level there. Buyers need to first defend that level to see a potential bullish reversal.