DCF Conclusion Study on Costco (COST)
Members Research for 5/14
Note: This market session’s thoughts were shared in WhatsApp in the Pre-Market. This note will be focused on the DCF Conclusion Study of Costco.
Hi Everyone,
Today’s premium note will be a DCF Conclusion Study on Costco.
Our last discussion on Costco was about 45-60 days ago when I shared that I liked the January 2025 Call on COST Strike 725 when it still traded 715/shr. With Call Options that are impacted by Time Decay, I captured about a $15/shr move on the stock as it moved to my target $730-$740 target area. As always, I am able to capture only a piece of any move, never the full range.
The stock has skyrocketed since - last seen at $770-$780.
I personally shop at Costco a lot, and I obviously like their offerings. To put it simply, this stock at key support levels is a no brainer when you have lines of people checking out and the line starts at the BACK of the store.
I’ve never seen anything like it, and I hypothesize the same-store-sales losses seen in the retail sector has directly flown into Costco as it sees market share gains to further its compounding machine.
Costco is a symbol and proxy of the middle class. If and when Costco starts a descent lower, it will mark the beginning of a pronounced consumer downturn.
From a day-to-day standpoint, COST has a meaningful impact on NQ (Nasdaq-100). It is now a top 10 weighted company in NQ (or the QQQ ETF Equivalent) and this means it is just as important as Mag 7/FAAMG.
Below for members, we will discuss Costco and what the risk/reward looks like at today’s levels at its shares (and its valuation) approaches all-time highs.