With holiday season upon us, retail stocks are in play. But we’ve already seen high-end stores, such as Tiffany (NYSE:TIF), get pummeled by poor outlooks. The discount store is in vogue and Costco Wholesale Corp. (NASDAQ:COST) fits the bill.
COST reports earnings at 11 a.m. Eastern on Thursday, Dec. 8, with analysts expecting a modest 11% increase in profits from a year ago. That’s along the lines of recent growth rates, so expectations appear modest. The stock usually does well after earnings, so we’re looking for a bump above the expected holiday surge. (Last December the stock gained 6.8%.)
The company reported strong sales in November, and the shares are currently rebounding off their 100-day moving average, which defined the November low. But there’s plenty of upside room before hitting the 2011 (and all-time) high around the $86 level.
Analysts are split on COST, with just half rating the stock a “Buy.” Given COST’s premier position toward the lower end of the retail scale, the stock could see some upgrades. December should be kind to COST, so jump aboard the stock with the Jan 82.50 Calls for $5.60 or less.