Core Viewpoint - Costco Wholesale's stock has experienced a significant decline, down 15% from its 52-week high, raising questions about its valuation and potential investment opportunities [1][2]. Group 1: Stock Performance - Costco's shares have lost 11% of their value over the past six months and are currently trading around $895.08, down from a 52-week high of $1,078 [2][6]. - The stock's price-to-earnings (P/E) ratio is over 50, indicating that it may be overvalued despite the company's strong performance [7][9]. Group 2: Business Resilience - Despite a slowdown in growth, Costco has maintained positive growth rates, which is notable given the challenging economic conditions affecting many consumers [2][5]. - The company's business model, which relies on membership fees and creates a sense of urgency for purchases, contributes to its resilience and appeal to consumers [4][5]. Group 3: Valuation Concerns - Costco's stock has historically traded at high P/E ratios, averaging around 45 over the past five years, with peaks above 60, suggesting that the current valuation remains elevated [8][10]. - The high valuation poses risks for investors, as buying at such prices could limit returns and lead to potential losses if the company's performance does not meet high expectations [9][10].

Key Takeaways BJ is expected to post 5% higher Q3 revenues, while earnings may drop 6.8% year over year.Membership strength, digital growth and steady demand are likely to have supported BJ's Q3 performance.Higher SG&A and soft discretionary trends may pressure BJ's margins ahead of its results.BJ's Wholesale Club Holdings, Inc. (BJ) is likely to register an increase in the top line when it reports third-quarter fiscal 2025 results on Nov. 21, before the opening bell. The Zacks Consensus Estimate for revenu ...

Core Insights - Costco Wholesale reported strong net sales growth for fiscal 2025, with revenue reaching $275 billion, an 8% increase despite economic uncertainties and tariff concerns [1][4] - The company's stock performance has been modest, with only a 2% increase over the past year, leading to a cautious outlook for new investors [5] Financial Performance - Revenue growth was supported by a membership fee increase from $60 to $65, contributing to a $495 million rise in membership fee revenue [4] - Operating income rose by 12%, while net income increased by 10% to $8.1 billion, despite a 15% rise in income tax expenses [5] - Costco added 24 new locations, marking a nearly 3% increase in total warehouses to 914 [4] Valuation Concerns - The current price-to-earnings (P/E) ratio stands at 52, significantly higher than the S&P 500 average of 31 and its major competitors [6] - The likelihood of Costco's valuation decreasing to more reasonable levels, such as Walmart's P/E ratio of 39, appears low [9] Expansion Outlook - Costco's expansion strategy remains steady, with successful penetration into new U.S. markets and international growth, unlike competitors such as Walmart and Home Depot [10] - There is uncertainty regarding whether Costco can or should accelerate its expansion efforts [8]

Core Viewpoint - The current market correction, particularly in the Nasdaq Composite, presents potential buying opportunities for long-term investors, especially in high-quality stocks like Costco, despite its current high valuation [2][4][5]. Company Overview - Costco operates as a club retailer, generating significant revenue from membership fees, which constitute over half of its gross income, allowing it to maintain low retail margins [6][7]. - The company has a strong customer retention strategy, evidenced by a membership renewal rate exceeding 90%, indicating effective customer satisfaction [7]. Financial Performance - In the fiscal second quarter of 2025, Costco reported a 9.1% increase in sales, with same-store sales also rising, alongside a 5.1% increase in traffic and a 3.2% rise in the average ticket size [8]. - Despite a strong operational performance, Costco's quarterly earnings fell slightly short of Wall Street's consensus estimates, leading to some investor disappointment [8]. Valuation Insights - Costco's stock is currently considered expensive, with its price-to-sales, price-to-earnings, and price-to-book ratios all above their five-year averages and near historical highs [3][4]. - If the market downturn continues, Costco's stock may reach more reasonable valuation levels, making it an attractive option for growth-oriented investors [5][9]. Investment Strategy - Investors are encouraged to prepare a wish list of stocks, including Costco, to capitalize on potential price drops during market corrections [2][10]. - A target for increased interest in Costco's stock would be if its average price-to-earnings ratio aligns with its five-year average of around 40 [11].