This winning stock might disappoint investors hoping for huge near-term gains.
Costco (COST -0.39%) finished off 2023 with another stellar performance. The stock climbed nearly 45% amid renewed investor sentiment. This beat the 24% gain of the S&P 500.
As of this writing, shares of this top-notch retailer are priced at about $672. But bullish investors might have their sights set on the coveted $1,000 mark, which would translate to a near-50% gain.
Let's find out if Costco can reach this four-figure price by the end of 2024.
Costco is a wonderful company
There are lots of favorable attributes to this company. For starters, Costco runs a lucrative membership-based model, where customers pay $60 a year (for the standard plan) to have the ability to shop at one of the warehouse locations. This provides a high-margin, recurring revenue stream.
Even more importantly, offering memberships allows Costco to charge incredibly low prices on its merchandise assortment. In the most recent fiscal year (ended Sept. 3), the company reported a gross margin of 10.6%. This is much lower than other big retailers like Walmart, Home Depot, or Target. These low markups keep customers coming back.
These memberships also have proven pricing power. Management last raised the annual fee in June 2017. And there's lots of anticipation that a price hike will be implemented in the near term. With a worldwide renewal rate of 90.5% last quarter, Costco is likely to face minimal member churn.
The company has a wide economic moat that comes from scale advantages, and this makes it almost impossible for rivals to compete effectively. Costco generated $238 billion in merchandise sales in fiscal 2023, making it the world's third-largest retailer. This massive size gives the business negotiating leverage to acquire goods from suppliers at low per-unit costs, savings that are passed on to customers.
This creates a flywheel effect for Costco. More sales translates to better leverage versus suppliers, leading to ongoing savings for members. The business can constantly improve the customer value proposition over time.
It's not surprising that Costco has steadily been able to increase its top- and bottom-line figures. In the last 10 fiscal years, net sales rose at a compound annual rate of 8.7%, with diluted earnings per share increasing at an annualized clip of 11.8%. The business has been so successful financially that every few years, executives are able to pay a special dividend. Most recently, a $15 per-share payout was approved.
In both good and bad economic times, Costco continues finding ways to post strong business results. And this has put it on most investors' radars.
Why I'm still not betting on $1,000 per share
Based on what I've outlined above, anyone would agree that Costco is a fantastic business. But this doesn't mean investors should rush to buy shares just yet. Although the stock has historically rewarded investors, I don't think a 50% gain this year is likely. Moreover, I wouldn't be surprised if Costco shares lag the overall market in 2024.
The current price-to-earnings (P/E) ratio of 45.5, which is significantly higher than the trailing-10-year average and close to its all-time high, presents a major headwind for shareholders. For Costco's stock to reach $1,000 by year end with the multiple remaining constant, earnings per share would have to rise by 50%. This seems unlikely given how mature this business is. That type of rapid bottom-line growth just isn't in the cards anymore.
But I believe that Costco's P/E ratio could actually contract because of how expensive it is right now, and this creates downside risk for investors. Don't expect the $1,000 mark to be met in 2024. And for investors who are drawn to the business, it's best to practice patience and wait for a better valuation.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale, Home Depot, Target, and Walmart. The Motley Fool has a disclosure policy.
FAQs
The forecasted Costco price at the end of 2024 is $879 - and the year to year change +33%. The rise from today to year-end: +12%. In the middle of 2024, we expect to see $859.
What is the stock price forecast for Costco in 2025? ›
According to analysts, COST price target is 845.66 USD with a max estimate of 940.00 USD and a min estimate of 656.00 USD. Check if this forecast comes true in a year, meanwhile watch Costco Wholesale stock price chart and keep track of the current situation with COST news and stock market news.
How high can Costco stock go? ›
Average Price Target
Based on 25 Wall Street analysts offering 12 month price targets for Costco in the last 3 months. The average price target is $854.30 with a high forecast of $960.00 and a low forecast of $676.00. The average price target represents a -1.89% change from the last price of $870.75.
What is the true value of Costco stock? ›
As of 2024-06-15, the Intrinsic Value of Costco Wholesale Corp (COST) is 956.77 USD. This Costco valuation is based on the model Discounted Cash Flows (Growth Exit 5Y). With the current market price of 855.67 USD, the upside of Costco Wholesale Corp is 11.8%. The range of the Intrinsic Value is 681.72 - 1,658.48 USD.
What is the highest Costco stock has ever been? ›
Historical daily share price chart and data for Costco since 1986 adjusted for splits and dividends. The latest closing stock price for Costco as of June 18, 2024 is 870.75. The all-time high Costco stock closing price was 870.75 on June 18, 2024.
Is Costco over or undervalued? ›
The intrinsic value of one COST stock under the Base Case scenario is 429.81 USD. Compared to the current market price of 870.75 USD, Costco Wholesale Corp is Overvalued by 51%.
What is the 12 month forecast for Costco stock? ›
Costco Stock Forecast
The 28 analysts with 12-month price forecasts for Costco stock have an average target of 758.93, with a low estimate of 585 and a high estimate of 905. The average target predicts a decrease of -12.84% from the current stock price of 870.75.
What is the financial projection for Costco? ›
Costco Wholesale is forecast to grow earnings and revenue by 7.8% and 6.4% per annum respectively. EPS is expected to grow by 8% per annum. Return on equity is forecast to be 25.6% in 3 years.
What is Costco stock return for 10 years? ›
Ten Year Stock Price Total Return for Costco Wholesale is calculated as follows: Last Close Price [ 855.67 ] / Adj Prior Close Price [ 93.25 ] (-) 1 (=) Total Return [ 817.6% ] Prior price dividend adjustment factor is 0.81.
What is Kirkland price prediction? ›
Average Price Target
Based on 2 Wall Street analysts offering 12 month price targets for Kirkland's in the last 3 months. The average price target is $4.75 with a high forecast of $7.00 and a low forecast of $2.50. The average price target represents a 159.56% change from the last price of $1.83.
From 1985 when it became public to 2022, Costco grew its sales and profits at a compounded annual rate of 12% and 13%, respectively. Its stock price grew at a 17% annual rate compared to the S&P's 9.3% rate.
What is the stock price prediction for Costco in 2024? ›
According to our current COST stock forecast, the value of Costco shares will drop by -1.23% and reach $ 860.01 per share by June 24, 2024.
What are analysts saying about Costco stock? ›
According to analysts, Costco Wholesale's stock has a predicted upside of 4.96% based on their 12-month stock forecasts.
Who is the biggest shareholder of Costco? ›
The top individual insider shareholders of Costco are Craig Jelinek, Charles Munger, and Patrick Callans, and the top institutional shareholders are Vanguard Group Inc., BlackRock Inc., and State Street Corp.
Is Costco a buy, sell, or hold? ›
Costco currently has an average brokerage recommendation (ABR) of 1.63 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.)
What is the fair value of Costco stock? ›
As of 2024-06-09, the Fair Value of Costco Wholesale Corp (COST) is 244.68 USD. This value is based on the Peter Lynch's Fair Value formula. With the current market price of 845.58 USD, the upside of Costco Wholesale Corp is -71.1%.
Should I buy Kirkland stock? ›
Kirkland's has received a consensus rating of Buy. The company's average rating score is 3.00, and is based on 1 buy rating, no hold ratings, and no sell ratings.
How much debt does Costco stock have? ›
Total debt on the balance sheet as of February 2024 : $9.43 B. According to Costco's latest financial reports the company's total debt is $9.43 B. A company's total debt is the sum of all current and non-current debts.
Who makes the most money at Costco? ›
Highest paying jobs at Costco Wholesale
| Rank | Job Title | Hourly Rate |
|---|
| 1 | Staff Pharmacist | $65.08 |
| 2 | Software Developer | $55.42 |
| 3 | Director, Membership Marketing | $28.59 |
| 4 | Marketing Representative | $21.89 |
16 more rowsCostco's best-selling item is its Kirkland Signature Bath Tissue. It sells more than a billion rolls every year, bringing in over $400 million dollars in revenue. Costco's toilet paper is thicker and more absorbent than most other brands. It is also less expensive per sheet than many other brands.
Costco Wholesale (NASDAQ: COST) has been a reliable market-beating stock for ages. The company operates under a warehouse model that breeds loyalty and sales growth, and it also pays a dividend. There's nothing not to like about Costco stock -- except for its valuation.
Is Costco a long term investment? ›
If you are a growth investor looking to buy and hold for a long time, perhaps forever, you should probably give Costco a close look.
Is Costco financially stable? ›
This stickiness makes Costco's growth remarkably reliable despite macroeconomic challenges like inflation and high interest rates, which can weigh on sentiment. Net income increased by roughly 19% year over year to $1.74 billion.
What is the Costco policy for 2024? ›
Food Court Policy Changes
It read: "Effective April 8, 2024, an active Costco membership card will be required to purchase items from our food court. You can join today. Please see our membership counter for details."
Where are the new Costco locations coming in 2024? ›
The new branches will be in Florida, California, Tennessee and Texas. According to the company's website, a branch in Loomis, California will open in May. Four more stores will open in the month of June in different states: North Port, Florida; Mt. Juliet, Tennessee; Riverbank, California; and Richmond, Texas.
Where is Costco opening new stores in 2024 in the UK? ›
Targeted locations for the new sites are: Chelmsford, Colchester, Exeter, Oxford, Cambridge, Maidstone, Brighton, Portsmouth, Bournemouth/Poole, Preston, South Glasgow, South East London, Wolverhampton / North West Birmingham, and South West Birmingham.
What is the target stock price forecast for 2024? ›
Target Stock Price Forecast 2024-2025
The forecasted Target price at the end of 2024 is $155 - and the year to year change +9%. The rise from today to year-end: +6%. In the middle of 2024, we expect to see $154.
