WMT - Costco: Be Cautious About The Exuberant Scene In Shanghai
Investment Thesis
On August 27th, Costco Wholesale Corp. (COST) opened its first store in Shanghai, China. The huge crowds forced the wholesale retailer to close its new store early after officials warned on the impact on local traffic. The share price of COST rose 5% on a single trading day Tuesday, August 27th, reflecting investors' optimism for its future in China. However, we recommend the investors to be cautious as the exuberant scene in Shanghai does not necessarily represent a profitable business outlook for COST in China. The 34x price over forward earnings is clearly