U.S. Stocks Rise as Fear Index Eases Slightly
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 5 days ago
0mins
Should l Buy COST?
Source: Benzinga
- Fear Index Update: The CNN Money Fear & Greed Index slightly increased to 37.3 on Wednesday, remaining in the 'Fear' zone, indicating a modest improvement in market sentiment while cautioning against potential risks ahead.
- Stock Market Performance: U.S. stocks rose broadly on Wednesday, with the Nasdaq Composite gaining over 1% to close at 22,807.48, primarily driven by optimism surrounding potential U.S.-Iran diplomatic talks, reflecting a rebound in investor sentiment.
- Earnings Impact: Abercrombie & Fitch Co. (NYSE:ANF) saw its shares fall approximately 4% after disappointing fourth-quarter earnings, while Latham Group Inc. (NASDAQ:SWIM) surged 12% due to better-than-expected results and FY26 sales guidance, highlighting a divergence in market reactions to corporate performance.
- Employment and Economic Data: U.S. private businesses added 63,000 jobs in February, the highest since July, exceeding market expectations of 50,000, signaling strong economic recovery, while the ISM services PMI rose from 53.8 to 56.1, further bolstering confidence in economic growth.
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Analyst Views on COST
Wall Street analysts forecast COST stock price to rise
24 Analyst Rating
19 Buy
4 Hold
1 Sell
Strong Buy
Current: 998.100
Low
769.00
Averages
1061
High
1205
Current: 998.100
Low
769.00
Averages
1061
High
1205
About COST
Costco Wholesale Corporation (Costco) operates membership warehouses and e-commerce sites that offer a selection of nationally branded and private-label products in a wide range of categories. The Company buys the majority of its merchandise directly from suppliers and route it to cross-docking consolidation points (depots) or directly to its warehouses. It operates 891 warehouses, including 614 in the United States and Puerto Rico, 108 in Canada, 40 in Mexico, 35 in Japan, 29 in the United Kingdom, 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, and one each in Iceland, New Zealand and Sweden. It also operates e-commerce sites in the United States, Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia. The Company provides wide selection of merchandise, plus the convenience of specialty departments and exclusive member services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Market Disruption: While the U.S. is less reliant on oil flows from the Strait of Hormuz, a spike in prices could significantly disrupt European and Asian markets, ultimately affecting U.S. consumer spending and economic activity.
- Wholesale Retailer Impact: Wholesale retailers like Costco typically price gas about 20 cents below the national average, currently around $3.47 per gallon, with Costco's price at approximately $3.20; however, rising oil prices may compress their fuel margins at gas stations.
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- Lululemon International Expansion: Lululemon has seen a 19% compound annual growth rate over the past decade, and despite a recent 7% revenue increase, its 46% year-over-year growth in China indicates strong international demand, positioning it for greater market share in the global athletic apparel sector.
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See More
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- Walmart's Performance Growth: In its fiscal Q4 2026, Walmart reported a 5.6% year-over-year revenue increase, with adjusted earnings per share at $0.74, reflecting over 12% growth, showcasing its ongoing digital transformation and profitability enhancement.
- E-commerce Surge: Walmart's global e-commerce sales soared 24% in the quarter, now representing 23% of total net sales, while its advertising business jumped 37%, indicating a shift towards higher-margin revenue streams that drove a 10.8% increase in operating income.
- Costco's Steady Performance: Costco achieved net sales of $68.2 billion in fiscal Q2 2026, up 9.1% year-over-year, with adjusted comparable sales rising 6.7%, demonstrating strong customer loyalty and a stable revenue stream from membership fees.
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See More
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- Unconventional Retail Model: Costco's business model focuses on selling a wide range of products at low prices, with an average gross margin of only 11%, yet it generates $1.4 billion in high-margin recurring revenue through its membership model, enhancing customer loyalty and frequent visits.
- Significant Scale Advantage: In the latest fiscal quarter, Costco reported net sales of $68.2 billion, and despite carrying only 4,000 SKUs compared to 30,000 at typical supermarkets, this limited selection gives it strong negotiating power with suppliers, maintaining low prices and high customer traffic.
- Stock Valuation Misalignment: While Costco is known for its low-price strategy, its stock trades at a high P/E ratio of 52.6, indicating that the market values its stability and predictability, even though its diluted EPS has grown by 16.4% over the past five years, suggesting its valuation may not be justified compared to faster-growing tech stocks.
- Outstanding Market Performance: As of March 5, Costco's trailing 10-year total return reached 691%, significantly outperforming the S&P 500 index; however, investors should carefully consider whether its high valuation is reasonable to avoid potential investment risks.
See More
Impact of Oil Prices Surpassing $100 Per Barrel
- Surge in Oil Prices: Oil prices have surged past $100 per barrel, with strategist Paul Eitelman indicating that if prices reach $150, gas prices in the U.S. could exceed $4.50 per gallon, raising consumer concerns about a potential recession.
- Market Disruption: While the U.S. is less reliant on oil flows from the Strait of Hormuz, a spike in prices could significantly disrupt European and Asian markets, ultimately affecting U.S. consumer spending and economic activity.
- Wholesale Retailer Impact: Wholesale retailers like Costco typically price gas about 20 cents below the national average, currently around $3.47 per gallon, with Costco's price at approximately $3.20; however, rising oil prices may compress their fuel margins at gas stations.
- Consumer Behavior Shift: Costco's members often shop in-store after fueling, with about 50% of customers entering the store post-refueling, which brings incremental traffic, although rising oil prices could impact overall profitability.
See More
MercadoLibre and Lululemon Show Strong Growth Potential
- Market Leadership: MercadoLibre, as Latin America's leading e-commerce and fintech platform, reported a 45% year-over-year revenue increase in Q4, with its online marketplace reaching 121 million unique buyers, highlighting its strong growth potential in underserved populations.
- Surge in Credit Products: Mercado Pago's credit portfolio surged 90% year-over-year last quarter, indicating significant market opportunities in countries like Mexico where basic financial service penetration is low.
- International Expansion Opportunities: Lululemon has achieved a 19% compound annual revenue growth over the past decade, and despite recent slowdowns in the U.S. market, its sales in China grew 46% year-over-year, showcasing its brand's strong international appeal.
- Steady Membership Growth: Costco has attracted 81 million paid members through its low-price strategy, with a 6.2% membership increase in fiscal 2025, indicating substantial expansion potential both domestically and internationally over the next 20 years.
See More
Three Compelling Long-Term Stock Investments
- MercadoLibre Growth Potential: As Latin America's leading e-commerce and fintech platform, MercadoLibre achieved a 45% revenue increase in Q4, highlighting its significant potential to expand financial services to underserved populations, which could drive future revenue and profit growth.
- Lululemon International Expansion: Lululemon has seen a 19% compound annual growth rate over the past decade, and despite a recent 7% revenue increase, its 46% year-over-year growth in China indicates strong international demand, positioning it for greater market share in the global athletic apparel sector.
- Costco Membership Growth: Costco has attracted 81 million paid members through its low-price strategy and membership fee model, with a 6.2% increase in memberships in fiscal 2025, demonstrating robust performance in the U.S. market while also showcasing significant international expansion potential, particularly in China and Europe.
- Long-Term Investment Value: All three companies exhibit strong growth potential and market demand; despite facing short-term challenges, their long-term investment value is substantial, making them suitable for holding to accumulate wealth over time.
See More
Investment Comparison Between Walmart and Costco
- Walmart's Performance Growth: In fiscal Q4 2026, Walmart's revenue rose 5.6% year-over-year, with adjusted EPS at $0.74, up over 12%, indicating improved profitability from its digital transformation, and management expects operating income to grow 6% to 8% going forward.
- Costco's Sales Performance: Costco reported net sales of $68.2 billion for fiscal Q2 2026, a 9.1% year-over-year increase, with adjusted comparable sales up 6.7%, reflecting strong customer loyalty and a stable revenue stream from membership fees, which grew 13.6% to $1.36 billion.
- E-commerce and Advertising Growth: Walmart's global e-commerce sales surged 24% in the quarter, now representing 23% of total net sales, while its advertising business jumped 37%, indicating a significant shift towards higher-margin revenue streams that is positively impacting its financial performance.
- Valuation Comparison: While Walmart trades at about 44 times earnings, lower than Costco's 54 times, its diversified revenue streams and growth in advertising make it a more attractive investment in the current market, necessitating careful evaluation of both companies' growth potential against market expectations.
See More
Investment Comparison: Walmart vs. Costco
- Walmart's Performance Growth: In its fiscal Q4 2026, Walmart reported a 5.6% year-over-year revenue increase, with adjusted earnings per share at $0.74, reflecting over 12% growth, showcasing its ongoing digital transformation and profitability enhancement.
- E-commerce Surge: Walmart's global e-commerce sales soared 24% in the quarter, now representing 23% of total net sales, while its advertising business jumped 37%, indicating a shift towards higher-margin revenue streams that drove a 10.8% increase in operating income.
- Costco's Steady Performance: Costco achieved net sales of $68.2 billion in fiscal Q2 2026, up 9.1% year-over-year, with adjusted comparable sales rising 6.7%, demonstrating strong customer loyalty and a stable revenue stream from membership fees.
- Digital Sales Growth: Costco's digitally enabled comparable sales surged 21.7% in Q2 and maintained a 20.8% growth in February, although its price-to-earnings ratio stands at 54, reflecting the market's high expectations for continued growth.
See More
Costco's Success and Investment Strategy
- Unconventional Retail Model: Costco's business model focuses on selling a wide range of products at low prices, with an average gross margin of only 11%, yet it generates $1.4 billion in high-margin recurring revenue through its membership model, enhancing customer loyalty and frequent visits.
- Significant Scale Advantage: In the latest fiscal quarter, Costco reported net sales of $68.2 billion, and despite carrying only 4,000 SKUs compared to 30,000 at typical supermarkets, this limited selection gives it strong negotiating power with suppliers, maintaining low prices and high customer traffic.
- Stock Valuation Misalignment: While Costco is known for its low-price strategy, its stock trades at a high P/E ratio of 52.6, indicating that the market values its stability and predictability, even though its diluted EPS has grown by 16.4% over the past five years, suggesting its valuation may not be justified compared to faster-growing tech stocks.
- Outstanding Market Performance: As of March 5, Costco's trailing 10-year total return reached 691%, significantly outperforming the S&P 500 index; however, investors should carefully consider whether its high valuation is reasonable to avoid potential investment risks.
See More
