Record Highs Within Reach for COST After Dividend Declaration

Stifel hiked the equity's price target to $390, too

Deputy Editor
Nov 17, 2020 at 12:15 PM
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The shares of Costco Wholesale Corporation (NASDAQ:COST) are up 1.5% at $385.65 at last check, after the big box retailer declared a special dividend of $10 per share, totaling $4.4 billion. The dividend will be funded through existing cash and paid on Dec. 11. This marks the company's fourth dividend payout in eight years, as higher demand for bulk items and other goods during the pandemic helps spark sales growth. 

Today's bump puts COST right below its Nov. 9 record high of $389.50, though the security may be set for its highest close ever -- if these gains hold. From a technical standpoint, the 60-day moving average looks like a strong leg of support going forward, as has captured several pullbacks over the past five months. Year-to-date, Costco stock is up 31.3%.

Stifel responded to the news with a price-target hike to $390 from $380, putting the 12-month consensus price target at $374.46 -- a 2.9% discount to current levels. Should COST continue to  rise, more analysts could follow Stifel's lead. Meanwhile, the security boasts 17 "buy" or better ratings, compared to just six "holds," and not a single "sell" on the books. 

Options traders have been singing a different tune. Though calls are still outpacing puts on an overall basis, the equity's 50-day put/call volume ratio of 0.76 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 98% of readings from the past year. This suggests puts have rarely been more popular during these past 12 months. 

Bulls are prevailing today, however. So far, 17,000 calls have crossed the tape -- double the intraday average -- compared to 9,111 puts. The November 390 call is seeing the most action, followed by the 387.50 call in the same monthly series, with new positions being opened at the former.


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