Costco Halts Free Samples Amid COVID-19 Outbreak

The wholesaler is taking notes from a competitor to protect customers

Deputy Editor
Mar 9, 2020 at 2:06 PM
facebook twitter linkedin


The coronavirus outbreak is confirmed to have spread to at least 25 states, and as a result customers of Costco Wholesale Corporation (NYSE:COST) will have to say good-bye to free samples for the time being. Costco, last seen trading down 2.4% at $303.78, made the decision after competitor Trader Joe’s also changed sample distribution protocols, according to an internal memo that was leaked on Thursday.

Meanwhile, analysts have been particularly bullish toward COST. While the global market continues to struggle in the wake of the COVID-19 outbreak, food and beverage companies must take extra precautions. Currently, 13 of 21 analysts are recommending a “buy” or better, while just one suggests a “strong sell.” Plus, the consensus 12-month price target of $52.85 is a modest 8.2% premium to its current perch. 

In the options pits, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows Costco with a 50-day call to put volume ratio of 1.71 that sits in the 95th percentile. This means that call buying has almost doubled put buying in the last two months.

There's ample room aboard the bearish bandwagon. Short interest has dipped slightly in the most recent reporting period since hitting a high-point in January. Currently, nearly five million shares are being held by short sellers, which accounts for a slim 1.13% of the equity’s total float.

 

 

 

These investors are using the market's volatility to their advantage and scoring triple-digit gains on many of their trades.

Even in today's sideways bear market, this trading strategy has continued to provide consistency and profitability to a small group of investors. By using this approach, these traders are removing directional risk and still hitting triple-digit returns. If you want access to this strategy, and lower risk with higher returns sounds good to you, then don't wait another minute.

Join us now to receive our next trades the moment they come out!

 

Common mistakes options traders make
 


 


 
Special Offers from Schaeffer's Trading Partners