Costco Stock Slips on Gross Margin, Online Sales Disappointment

Short-term traders have been unusually call-skewed toward COST

Managing Editor
Oct 5, 2018 at 9:54 AM
facebook twitter linkedin


Costco Wholesale Corporation (NASDAQ:COST) is down 2.7% at $225.37, after the company said gross margins fell 35 basis points to 10.92% and online sales grew at their slowest pace of the year in its fiscal fourth quarter. The retailer also said quarterly profit arrived at $2.36 per share -- in-line with estimates -- while revenue of $44.41 billion just beat expectations.

Long term, Costco stock has been climbing the charts, benefiting from double-barreled support at its 30-day and 40-day moving averages. And while the shares have breached these trendlines today, the 80-day moving average is cushioning the blow. Plus, the shares aren't too far removed from their Sept. 11 record peak of $245.16, and remain 35% higher year-over-year. What's more, COST may be signaling a stock rally into 2019.

Digging deeper, a fair amount of optimism is being priced into the shares. This is per COST's Schaeffer's put/call open interest ratio (SOIR) of 0.86, which ranks in the low 34th percentile of its annual range. In other words, short-term traders have been unusually call-skewed toward the bulk retailer, with call open interest outweighing put open interest among contracts expiring within three months. 

Further, analyst sentiment has been mostly optimistic, with 15 of the 21 firms following Costco stock holding "buy" or better ratings. Plus, the retailer's average 12-month price target of $239.63 stands at a premium to current levels. However, both RBC and J.P. Morgan Securities lowered their COST price targets today to $253 from $252, respectively.

 

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 

 


 


 
Special Offers from Schaeffer's Trading Partners