Costco Halts Free Samples Amid COVID-19 Outbreak

The wholesaler is taking notes from a competitor to protect customers

Assistant Editor
Mar 9, 2020 at 2:06 PM
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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.

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