Middle East Tensions Weigh on Stock Market
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 3 days ago
0mins
Source: CNBC
- Market Reaction: The S&P 500 and Nasdaq both fell about 1% on Friday due to escalating tensions in the Middle East, reflecting increased investor uncertainty, particularly after President Trump stated there would be no deal with Iran.
- Rising Oil Prices: Oil prices reached their highest levels since April 2024, causing U.S. gas prices to rise, which benefits Costco as its reputation for low gas prices attracts more customers, leading to a 1% increase in its stock price on Friday.
- Financial Sector Pressure: Financial stocks continue to face pressure as a spike in private credit redemptions weighs on sentiment, with shares of Goldman Sachs, Capital One, and Wells Fargo declining, while BlackRock's stock dropped nearly 6% after it limited withdrawals from a private credit fund, raising concerns about financial health.
- Investment Strategy: During Friday's meeting, Jim Cramer highlighted that despite the market's downturn, there are still buying opportunities, particularly favoring Goldman Sachs and Cardinal Health, the latter of which saw its fourth purchase this week.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy COST?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
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: 1005.300
Low
769.00
Averages
1061
High
1205
Current: 1005.300
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.
COST Options Trading Analysis and Yield Expectations
- Put Option Appeal: The current bid for the $1000.00 strike put option is $119.85, and if an investor sells to open this option, they commit to buying the stock at $1000.00, effectively lowering their cost basis to $880.15, making it an attractive alternative compared to the current price of $1005.30.
- Yield Potential Analysis: Should the put option expire worthless, it would yield an 11.98% return on cash commitment, or 4.33% annualized, indicating that options trading provides additional income opportunities for investors in the current market.
- Call Option Returns: The $1060.00 strike call option has a bid of $176.00, and if an investor buys shares at $1005.30 and sells this call, they could achieve a total return of 22.95% if the stock is called away at expiration, showcasing the potential profitability of this options strategy.
- Market Volatility Consideration: Both the put and call options have an implied volatility of approximately 26%, while the actual trailing twelve-month volatility stands at 21%, suggesting heightened market expectations for future price fluctuations, prompting investors to carefully assess risk versus reward.
See More
Investment Analysis: Costco vs Home Depot
- Market Competitive Advantage: Costco generated net sales of $68.2 billion in Q2 2026, leveraging its scale and limited stock-keeping units to enhance negotiating power with suppliers, thereby maintaining low prices and improving customer satisfaction.
- Financial Stability: Costco has reported same-store sales growth in every fiscal year, with a notable 7.7% increase during the pandemic-affected fiscal 2020, demonstrating resilience across various economic conditions and attracting long-term investor interest.
- Valuation Comparison: Home Depot achieved $165 billion in revenue for fiscal 2025, and while its P/E ratio of 25.2 is lower than Costco's 53.5, its same-store sales growth of only 0.5% indicates cyclical demand challenges it faces.
- Dividend Appeal: Home Depot offers a 2.60% dividend yield, attracting investors despite macroeconomic uncertainties, as it maintains profitability and a stable dividend payout, which may appeal to income-seeking investors.
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
COST Options Trading Analysis and Yield Expectations
- Put Option Appeal: The current bid for the $1000.00 strike put option is $119.85, and if an investor sells to open this option, they commit to buying the stock at $1000.00, effectively lowering their cost basis to $880.15, making it an attractive alternative compared to the current price of $1005.30.
- Yield Potential Analysis: Should the put option expire worthless, it would yield an 11.98% return on cash commitment, or 4.33% annualized, indicating that options trading provides additional income opportunities for investors in the current market.
- Call Option Returns: The $1060.00 strike call option has a bid of $176.00, and if an investor buys shares at $1005.30 and sells this call, they could achieve a total return of 22.95% if the stock is called away at expiration, showcasing the potential profitability of this options strategy.
- Market Volatility Consideration: Both the put and call options have an implied volatility of approximately 26%, while the actual trailing twelve-month volatility stands at 21%, suggesting heightened market expectations for future price fluctuations, prompting investors to carefully assess risk versus reward.
See More
Investment Analysis: Costco vs Home Depot
- Market Competitive Advantage: Costco generated net sales of $68.2 billion in Q2 2026, leveraging its scale and limited stock-keeping units to enhance negotiating power with suppliers, thereby maintaining low prices and improving customer satisfaction.
- Financial Stability: Costco has reported same-store sales growth in every fiscal year, with a notable 7.7% increase during the pandemic-affected fiscal 2020, demonstrating resilience across various economic conditions and attracting long-term investor interest.
- Valuation Comparison: Home Depot achieved $165 billion in revenue for fiscal 2025, and while its P/E ratio of 25.2 is lower than Costco's 53.5, its same-store sales growth of only 0.5% indicates cyclical demand challenges it faces.
- Dividend Appeal: Home Depot offers a 2.60% dividend yield, attracting investors despite macroeconomic uncertainties, as it maintains profitability and a stable dividend payout, which may appeal to income-seeking investors.
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
