Costco (COST 0.33%) has been an outstanding holding for investors. In the past 40 years, shares have climbed 14,540%, crushing the S&P 500 index. Including dividends, the gains are even more impressive.This top retail enterprise has many attractive qualities that can draw in investors looking to own a great business. But is Costco a worthy long-term buy right now?Costco's advantagesCostco is a top-notch company. It has become a favorite among consumers looking to score huge savings on a variety of merchandi ...

Company Overview - Costco has generated a total return of 22,000% over the past 40 years, translating a $10,000 investment in April 1985 to $2.2 billion today, with an annualized gain of 14.4% [1] - The company operates 897 locations globally, with a focus on providing quality merchandise at affordable prices [3] Growth and Expansion - Costco's store count has grown from 221 in 1994, with plans for nearly half of new store openings to occur outside the U.S. [4] - Same-store sales increased by 6.8% in Q2, marking at least 13 consecutive years of growth in this key metric [5] - Diluted earnings per share have grown at a compound annual rate of 11.6% over the past 20 years, with expectations of 11.1% growth from fiscal 2024 to fiscal 2027 [6] Competitive Position - Costco is the third-largest retailer globally, generating $62.5 billion in net sales during the 12-week period ending Feb. 16 [8] - The company benefits from significant buying leverage due to its scale and a limited number of stock-keeping units, which allows for cost savings passed on to consumers [9] - Membership households increased by 6.8% in the latest fiscal quarter, with a high renewal rate of 90.5% [9] Investment Considerations - Current share prices are down 9% from their February peak, but the price-to-earnings ratio stands at 57, which is near its highest level ever [10] - The high valuation may hinder potential returns, suggesting that investors should be cautious about purchasing the stock at this time [11]

Core Insights - Sam's Club is implementing a significant change to its grocery payment system by phasing out traditional checkouts and introducing an AI-driven "Scan & Go" system to enhance the shopping experience [1][2][4] Group 1: Technology Implementation - The "Scan & Go" system allows members to scan products using the Sam's Club mobile app, with the addition of an AI check at the exit to verify purchases [2][4] - The new technology aims to eliminate the need for receipt checks at the door, creating a frictionless shopping experience [1][2] Group 2: Strategic Vision - Chris Nicholas, Sam's Club president and CEO, emphasized the company's growth ambitions and commitment to becoming the world's best club retailer during the 2025 Investment Community Meeting [2][4] - The newly opened store in Grapevine, Texas, serves as a model for future locations, designed to enhance shopping speed and enjoyment [4][5] Group 3: Employee and Operational Enhancements - The integration of AI tools is intended to improve operational efficiency and associate engagement, with investments in wages and career progression opportunities [10][11] - The company believes that enhancing the member experience through meaningful interactions with associates will foster loyalty and renewals [11] Group 4: Competitive Landscape - Sam's Club's approach contrasts with that of its main rival, Costco, which continues to rely on traditional checkout lanes [8] - The company maintains that its 100,000 associates are central to its operational momentum and success [8]

Group 1 - Costco Wholesale Corporation announced a quarterly cash dividend increase from $1.16 to $1.30 per share, amounting to an annualized dividend of $5.20, payable on May 16, 2025 [1] - The company operates a total of 904 warehouses globally, with 623 located in the United States and Puerto Rico, and additional locations in Canada, Mexico, Japan, the United Kingdom, Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden [2] Group 2 - Costco also runs e-commerce sites in multiple countries including the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan, and Australia [2]

Group 1: Costco Overview - Costco's stock price has risen significantly, with a forward-looking price-to-earnings (P/E) ratio of 50, above its five-year average of 39, and a price-to-sales ratio of 1.53, exceeding its five-year average of 1.08 [2] - The company operates 903 locations globally, with a market value of $428 billion, making rapid growth challenging [3] - Costco has averaged annual gains of around 20% over the past 10 to 15 years, but a conservative estimate suggests a 12% growth rate could lead to a market value of $1.3 trillion in a decade [3] Group 2: Taiwan Semiconductor Manufacturing - Taiwan Semiconductor Manufacturing (TSM) holds a dominant position in the semiconductor industry, with a market share of 67% [4] - The company plans to invest over $100 billion in U.S.-based plants, benefiting from a joint venture with Intel and increasing demand for chips due to the rise of artificial intelligence [5] - TSM's stock has grown at an average annual rate of around 20% over the past 10 to 15 years, and a 10% growth rate could increase its market value from $823 billion to $2.1 trillion [6] Group 3: Alphabet - Alphabet, the parent company of Google, has a market value of $1.9 trillion and is considered undervalued with a forward P/E of 16.3, below its five-year average of 22.5 [7] - The company has ambitious spending plans that could drive future growth, despite concerns about potential government intervention [7] - Alphabet's diverse portfolio includes YouTube, Nest, and ventures into healthcare and self-driving technology, positioning it for continued growth [7] Group 4: Tencent Holdings - Tencent Holdings has a market value of $513 billion and needs to increase its value by a factor of 2.5, averaging a 10% annual gain to surpass Costco [8] - The company has averaged annual gains of 11% over the past decade and is currently undervalued with a forward P/E of 2.1, well below its five-year average of 7.5 [9] - Tencent owns WeChat, a leading social media platform in China, and is involved in mobile gaming, fintech, and cloud software, indicating strong growth potential despite trade war uncertainties [9][10]

Core Insights - Costco reported net sales of $25.51 billion for March 2025, marking an 8.6% increase from $23.48 billion in March 2024 [1] - For the first 31 weeks of the fiscal year, net sales reached $158.87 billion, up 8.3% from $146.64 billion in the same period last year [1] Sales Performance - Comparable sales for the five weeks ended April 6, 2025, were as follows: - U.S.: 7.5% - Canada: 4.1% - Other International: 2.9% - Total Company: 6.4% - E-commerce: 16.2% [1] - For the 31 weeks, comparable sales were: - U.S.: 7.0% - Canada: 4.9% - Other International: 3.0% - Total Company: 6.1% - E-commerce: 16.8% [1] Adjusted Comparable Sales - Comparable sales excluding the impacts from changes in gasoline prices and foreign exchange for the five weeks were: - U.S.: 8.7% - Canada: 10.6% - Other International: 9.9% - Total Company: 9.1% - E-commerce: 17.5% [1] - For the 31 weeks, adjusted comparable sales were: - U.S.: 8.0% - Canada: 8.9% - Other International: 8.9% - Total Company: 8.3% - E-commerce: 17.7% [1] Additional Context - March 2025 had one additional shopping day compared to the previous year due to the calendar shift of Easter, positively impacting total and comparable sales by approximately 1.5% [1] - Costco operates 903 warehouses globally, with 623 located in the U.S. and Puerto Rico [3]

Core Insights - Sam's Club is set to accelerate its expansion by opening approximately 15 new stores annually and remodeling its existing 600 locations across the U.S. [1][2] - The company aims to double its membership over the next eight to ten years, building on its previous plan to open about 30 new stores over five years [2] - Despite economic uncertainties due to tariffs, the CEO expresses confidence in sustained demand for Sam's Club, suggesting that the focus on cost savings will be increasingly relevant [3][4] Expansion Plans - Sam's Club plans to open around 15 new stores each year moving forward [1] - The chain previously announced a plan to open about 30 new stores in the U.S. over five years, following the closure of 63 locations in 2018 [2] Membership Growth - The goal is to double membership within the next eight to ten years [2] Economic Context - The expansion occurs amid economic uncertainty due to President Trump's tariffs, which have raised concerns about price increases and consumer spending [3] - The company has withdrawn its first-quarter operating income forecast, indicating potential profit impacts from maintaining price stability amid rising costs [3] Management Confidence - The CEO believes that demand for Sam's Club will remain strong, even in a challenging economic environment, emphasizing that the company's value proposition becomes more significant during tough times [4]

Core Viewpoint - Costco Wholesale has consistently outperformed the broader market, generating a total return of 33% over the past 12 months, significantly ahead of the S&P 500's 9% [1] Financial Performance - In Q2 of fiscal 2025, Costco reported a net sales increase of 9.1%, driven by a same-store sales gain of 6.8%, primarily due to higher foot traffic [3] - Strong demand was noted across various categories, including gold and jewelry, gift cards, toys, and home furnishings, with all categories showing double-digit growth [4] - The membership model has proven effective, with a 6.8% year-over-year increase in membership base and a 93% renewal rate in the U.S. and Canada [5] Market Position and Resilience - Despite economic uncertainties, Costco is viewed as recession-resistant due to its broad product offerings at low prices, making it an all-weather business [8] - The company has maintained a strong growth trajectory, with diluted earnings per share (EPS) increasing at a compound annual rate of 11.5% over the past decade [6] Stock Performance Outlook - While Costco has a strong historical performance, predicting its stock performance over the next 12 months is challenging [9] - The stock currently trades at a price-to-earnings ratio of 56.3, which is considered high given its EPS growth of 16.9% in fiscal 2024 and a forecasted 12.2% gain for the current fiscal year [10] - There is a belief that the stock may underperform the S&P 500 despite the potential for higher prices in the future [10]

Core Viewpoint - The current market uncertainty, primarily due to tariff announcements from the Trump administration, has negatively impacted investor sentiment, with the S&P 500 trading approximately 9% below its February peak [1] Company Performance - Costco has shown impressive performance with a total return of 224% over the past five years, despite its shares being 16% below their record high set in February [2] - For fiscal 2025 second quarter, Costco reported a same-store sales (comps) growth of 6.8%, continuing a streak of consistent growth even during challenging economic conditions [3][4] - The company's diluted earnings per share (EPS) have increased at a compound annual growth rate of 11.5% over the past decade, with expectations for the same growth rate between fiscal 2024 and fiscal 2027 [4] Competitive Position - Costco's scale and operational efficiency contribute significantly to its success, with net sales of $62.5 billion in the second quarter, making it the third largest retailer globally [6] - The company maintains a competitive edge by offering everyday low prices, supported by a membership base of 78.4 million households, which grew by 6.8% year-over-year and boasts a 93% renewal rate in the U.S. and Canada [7] Market Dynamics - Despite competition from Amazon and its Prime membership, Costco has consistently grown its membership, revenue, and EPS, indicating strong consumer preference for in-person shopping [8] - The current valuation of Costco shares is high, with a price-to-earnings ratio of 52.6, leading to skepticism about the potential for similar investment returns as seen in the past [9][10]

Core Viewpoint - Investors navigated a volatile trading week influenced by tariff rhetoric from the Trump administration, leading to weekly stock losses despite a rally on Friday [1] Group 1: Zscaler - Zscaler, a cloud-based cybersecurity company, is recognized for its Zero Trust Exchange platform, which protects users and applications from cyber threats [3] - The company reported strong second-quarter results for fiscal 2025, driven by the adoption of Zero Trust and artificial intelligence [3][4] - Analyst Shaul Eyal from TD Cowen reiterated a buy rating with a price target of $270, citing a revamped go-to-market strategy and improved sales productivity [4] - Zscaler's annual contract value from its AI Analytics portfolio nearly doubled year over year, with expectations to reach $3 billion in annual recurring revenue by the end of fiscal 2025 [5] - The company serves 14 of the 15 U.S. cabinet agencies and is expected to benefit from government efficiency initiatives [6] - The number of customers generating over $1 million in annual recurring revenue increased by 25% year over year to 620 [6] Group 2: Costco Wholesale - Costco Wholesale reported mixed results for the second quarter of fiscal 2025, with revenue exceeding expectations but earnings missing estimates [8] - Analyst Corey Tarlowe from Jefferies noted that the earnings miss was due to lower-than-expected gross margin expansion and forex headwinds, but highlighted strong comparable sales growth of 8.3% [9][10] - Costco's U.S. sales benefited from increased traffic and ticket growth, and the company has opportunities for further warehouse expansion [11] - The company confirmed that about one-third of its U.S. sales are imported, with less than half sourced from China, Mexico, and Canada, which may insulate it from tariff impacts [11][12] - Tarlowe raised the price target for Costco stock to $1,180 from $1,145 while maintaining a buy rating [12] Group 3: Karman Holdings - Karman Holdings, a defense and space systems manufacturer, recently went public and offers a diverse range of products [14] - Analyst Amit Daryanani from Evercore initiated coverage with a buy rating and a price target of $38, citing strong growth potential driven by various secular tailwinds [15] - Daryanani highlighted growth in U.S. orbital launch volume and increased focus on missile defense as key drivers for Karman's growth [16] - Fiscal 2025 sales are expected to grow 18% year over year to $409 million, with EPS projected at 36 cents and an EBITDA margin expansion to 31% [16]