Options traders and analyst alike had been optimistic towards Costco stock
Shares of bulk grocery concern Costco Wholesale Corporation (NASDAQ:COST) are falling in early trading after the company reported weaker-than-expected earnings and same-store sales for the fiscal second quarter. But while brokerage firm RBC cut its price target to $205 from $209, it kept its "outperform" rating in place, adding the company's investments in e-commerce are helping drive more traffic to its stores.
Analysts at Jefferies also noted the company's strong e-commerce growth, but kept their tepid "hold" rating in place, citing uncertainty for how Costco will use its savings from tax reform. Morgan Stanley is concerned about the retailer's tax savings plans, as well. "Even with the benefit from a lower tax rate," analyst Simeon Gutman wrote, "EPS growth will likely slow, making it tough for COST shares to outperform over the next 12 months."
After all this, the stock is down 2.2% at $183.16. Looking back, COST has had a decent year, gaining 15% over the past 12 months, touching a record high of $199.88 on Jan. 29. The 80-day moving average contained the most recent pullback in February, but the shares have dipped back below this level today.
Analyst sentiment had been optimistic, too. Of the 18 brokerages following the stock, 14 carry "buy" or "strong buy" recommendations, and the security's average 12-month target price stands up at $208.04. This seemingly leaves the door open for more unflattering attention from this group.
In the options pits, traders have been optimistic towards Costco stock, with data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) showing COST with a 10-day call/put volume ratio of 1.50, ranking in the 72nd annual percentile. This suggests calls have been purchased over puts at a faster-than-usual clip over the past two weeks.
Meanwhile, the security's Schaeffer's Volatility Scorecard (SVS) stands at a respectable 81 out of 100, which indicates that COST shares have tended to exceed options traders' volatility expectations during the past year.