Over time, a company’s earnings can go a long way to determining the value of its share price. A company that can keep increasing earnings will likely see their share price trend higher.
However, sometimes, the market will look at other factors besides earnings. One related issue is revenues, the raw cash that comes in the door before costs are factored in. A company with rising earnings but concerned over revenues may get punished by the markets, leading to a buying opportunity.
That could be the case with retailer Costco (COST). The warehouse giant beat on earnings, but didn’t provide strong future revenue estimates. And the company continues to grow its overall sales, including the sales of one-ounce gold bars.
Costco shares are up 60% over the past year, but the stock remains near its all-time highs. The recent drop based on earnings likely won’t change the uptrend, making this recent pullback worthy of a buy.
Action to take: Costco is a leading retailer, and will always command a premium. It’s a stock to buy on a market pullback, and interested investors may want to nibble at shares during times of market weakness.
Costco pays a 0.5% dividend, but also periodically pays special dividends based on earnings.
For traders, shares will likely trend higher. The March 2025 $1,000 calls, last trading for about $23.00, could see mid double-digit returns on a further uptrend.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.