Bulls Target Costco Stock After Retailer Shares Impressive March Sales

The equity is trading at record highs today

Digital Content Manager
Apr 7, 2022 at 1:54 PM
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Costco Wholesale Corporation (NASDAQ:COST) is bucking the broad-market pullback this afternoon, last seen up 2.9% at $601.82, after the company posted upbeat comparable sales for March. The big box retailer reported a 17.2% jump for the month, which topped analysts' estimates, coming in above the 12.7% rise in U.S. sales as well.

The report was met with a bevy of bull notes, with no less than four analysts hiking their price targets. The highest came from Jefferies to $670 from $650. Meanwhile, Evercore ISI also chimed in, calling the stock a core holding amidst a retail landscape pockmarked by inflation issues. The analyst added that "rising renewal rates and lagged inflationary pass-through" could lead to a future fee increase, while it also pointed to a potential special dividend. 

Even before today's price-target hikes, the brokerage bunch was optimistic on Costco stock. Of the 16 in coverage, 12 said "buy" or better. There's still room for more price-target adjustments however, as the 12-month consensus price target of $574.90 is a 5.1% discount to current levels. 

COST is trading at its highest level on record today, earlier hitting $605.48. It's been an impressive comeback off its late-February pullback, especially as many stocks continue to lag. In fact, Costco stock added 10.9% last month, logging its biggest percentage jump since November 2017. With steadfast support guiding the shares up the charts, COST now boasts a year-over-year lead of 68.2%. 

cost chart april 7

Options traders are also reacting to Costco's latest announcement. So far, 62,000 calls and 31,000 puts have exchanged hands, which is four time the intraday average. The weekly 4/8 600-strike call is by far the most popular, with positions being bought to open here. This implies traders are expecting even more upside for the stock by the time these contracts expire tomorrow at the close. 

Sentiment among short-term options traders, however, has been incredibly put-heavy, which could provide additional tailwinds, should some of these bears begin to jump ship. This is per COST's Schaeffer's put/call volume ratio (SOIR) of 1.52, which sits higher than 99% of readings from the past year. 

 

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