Trade of the Day: Put COST Stock on Your Shopping List

Advertisement

Costco Wholesale Corporation (NASDAQ:COST) — This operator of about 670 membership warehouses worldwide reported better-than-expected fiscal second-quarter earnings in early March, with net income rising 29% to $598 million. Same-store sales increased 2% in the period thanks to 5.5% growth in traffic.

Aggressive pricing, improving consumer confidence, an upscale product mix and wider gas margins should benefit the company going forward.

Following the earnings report, analysts at Credit Suisse Group AG (ADR) (NYSE:CS), who have an “outperform” rating on COST stock, upped their 12-month target price to $160 from a previous $145.

S&P Capital IQ also raised its target by $8 to $164. Its analysts believe earnings will benefit from increased sales due to lower input cost driven pricing and improved operating leverage. They increased their fiscal 2015 (ending in August) earnings estimate by $0.05 to $5.27 per share and fiscal 2016 estimates by $0.10 to $5.80.

COST stock has held its intermediate uptrend line, which started at about $130 in October, for six months. Since then, shaves have seen a solid increase in demand, topping at $156.85 on Feb. 4.

Current upside volume has been strong, supporting a bullish saucer with a target of $160. Support rests at the conjunction of its long-term bullish support line and a line connecting four tops at $145.50.

All internal indicators, including MACD, momentum and stochastics, are either on buy or accumulation signals.

Buy COST stock under $150 for a three-month trading target of $165, which would result in a 10% gain. A stop-loss order should be entered at $145. Investors should also consider COST stock as a longer-term, cornerstone investment in the retail sector.

COST Stock Chart
Click to Enlarge

Chart Key


Article printed from InvestorPlace Media, https://investorplace.com/2015/03/costco-wholesale-corporation-cost-stock-trade-of-the-day/.

©2024 InvestorPlace Media, LLC