Costco Stock Has Moved Up Over the Last Month - What Are the Best Plays Now?

Core Viewpoint - Costco Wholesale Corp (COST) stock has rebounded significantly, with a current price of $979.29, reflecting a 12.13% increase from $873.35 at the end of December 2022, indicating a potential investment opportunity based on strong free cash flow (FCF) metrics [1][2]. Financial Performance - Costco is projected to generate $10.68 billion in free cash flow over the next 12 months, supported by strong FCF margins and implied higher operating leverage [2]. - The company's future value could reach approximately $460 billion based on a 2.32% FCF yield metric, while its current market capitalization stands at $435 billion, suggesting a potential upside of 5.75% [2][3]. Stock Price Target - A new stock price target has been calculated at $1,035.60, based on the current stock price and the identified upside potential [3]. Investment Strategies - Three investment strategies were discussed for playing COST stock, including buying in-the-money calls, shorting out-of-the-money covered calls, and shorting out-of-the-money puts [4]. - The OTM covered calls strategy has yielded a total return of 5.5%, while the short-put strategy is expected to result in minimal returns as the put option is likely to expire worthless [5].