Costco Wholesale Corporation
Costco Wholesale Corporation (NASDAQ: COST) is a global retailer with warehouse club operations in eight countries. The Company operates an international chain of membership warehouses, mainly under the Costco Wholesale name. The Company's warehouses are designed to help small- to medium-sized businesses reduce costs in purchasing for resale and for everyday business use.
Recent Business Update:
- Q1FY23 Financial results: Costco released its financial results for the three-month period ending on May 8, 2023. The company reported net sales of USD 51.6 billion, representing a notable 16.3% increase compared to the same period the previous year. Excluding the impact of new club openings and closings, comparable sales saw a significant rise of 13.2%. Earnings per diluted share amounted to USD 2.92, reflecting a robust 27.5% increase from the same period last year. Costco's operating margin improved to 30.2%, up from 29.3% in the corresponding period last year. Furthermore, the company's return on equity demonstrated growth, reaching 29.7% compared to 28.7% in the same period last year.
- May 2023 Sales Financial Update: In May 2023, Costco announced its financial results for the period, reporting net sales of USD 18.45 billion, reflecting a 1.2% increase compared to May 2022. Excluding the impact of foreign exchange and new club openings and closings, comparable sales experienced a 1.0% increase. Earnings per diluted share amounted to USD 1.46, marking a notable 10.5% increase from May 2022. Costco's operating margin showed improvement, reaching 30.5%, up from 29.9% in May 2022. Additionally, the company's return on equity demonstrated growth, reaching 29.7% compared to 28.9% in May 2022.
- Increased Quarterly Dividend: On April 19, 2023, Costco Wholesale Corporation made an announcement regarding an approved quarterly dividend increase by its Board of Directors. The cash dividend has been raised from 90 cents to USD 1.02 per share, amounting to USD 4.08 on an annualized basis. Shareholders of record at the close of business on May 5, 2023, will be eligible for the dividend, which is payable on May 19, 2023. Notably, this marks the 27th consecutive year in which Costco has raised its dividend, demonstrating the company's commitment to providing consistent returns to its shareholders.
Technical Observation (on the daily chart)
The stock price has experienced consolidation over the past year, with a mere return of 9.13%, indicating an uptrend trend. This uptrend trend is also evident in the medium-term, with a return of 7.23% in the previous six months. The price has broken above an important resistance of USD 500, after the announcement of Q3FY23 financial results. The momentum indicator RSI (14 period) currently stands at 63.51, moving upside towards the overbought zone. It is worth noting that the price is currently trading above both the 21-day and 50-day SMA trend-following indicators, and these SMAs will act as short-term supports in case of correction.
Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
How to Read the Charts?
The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.
The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.
The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.
The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.
Technical Indicators Defined: -
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
The reference date for all price data, currency, technical indicators, support, and resistance levels is June 06, 2023. The reference data in this report has been partly sourced from REFINITIV.
Abbreviations
CMP: Current Market Price
SMA: Simple Moving Average
RSI: Relative Strength Index
USD: United States dollar
Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.
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