2024-03-31 08:00:00 ET
Summary
- Since the pandemic hit in 2020, Costco's stock has experienced a parabolic rally powered by inflation-driven sales growth and trading multiple expansion.
- However, Costco's growth has slowed back to mid-single-digit rates in recent quarters, rendering COST's 46x forward P/E multiple exorbitant.
- In today's note, we shall look at a reverse DCF analysis to comprehend investor expectations priced into COST stock. Furthermore, we will derive a fair value estimate for the retailer.
Introduction
Amid parabolic stock moves in the technology sector, the murmurs of an AI bubble are growing louder and louder; however, nosebleed stock valuations are not limited to the Nvidias of the world. Costco Wholesale Corporation ( COST ), a mature retail giant, is up ~50% over the last year, building on top of a parabolic rally in its stock during the liquidity bubble of 2020-21....
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Costco Is Dead Money