DLTR - Costco Reminds Me Of Coca-Cola's Major Top In 1998
2024-07-21 09:12:34 ET
Summary
- Costco's high valuation today is reminiscent of Coca-Cola's peak in 1998, with significant overvaluation compared to industry norms, the stock market generally, and prevailing interest rates.
- Costco's overvaluation condition continues to balloon in 2024, and may be similar to the circumstances surrounding other bubble stocks like Tesla and NVIDIA.
- Because of the company's large size and extreme in share pricing, long-term "underperformance" may be mathematically hard to escape after this year.
Costco Wholesale Corporation ( COST ) is a stock I have warned against owning over several years because of its extremely high valuation. Of course, the stock's unrelenting advance makes me look like an idiot, with my last effort a year ago linked here . Yet, I will try to explain my bearish logic again.
The valuation is so out of whack with business realities (for example its sub-2% free cash flow yield vs. alternatives available at 5%+ from risk-free cash investments), the closest parallel I can think of (using my 37 years of trading/investing experience) is undoubtedly the Coca-Cola ( KO ) peak for a valuation and stock quote in 1998....
Costco Reminds Me Of Coca-Cola's Major Top In 1998