Investing in large- and megacap stocks has been a lucrative endeavor in 2024, and one standout performer has been the retail giant Costco (NASDAQ: COST). With the stock up 32% year to date, investors are taking notice of Costco’s impressive performance. But with the stock currently trading at $863 per share, some are wondering if it could be a future stock-split candidate and potentially reach $1,000 by year-end.
Costco’s success in 2024 can be attributed to its chain of membership warehouse clubs, which have been gaining market share in the United States. The company has also seen strong growth across both its in-person and e-commerce operations, leading to increasing investor confidence.
The COVID-19 pandemic provided a boost to retailers like Costco, pushing the company’s annual sales from $150 billion to over $250 billion. Despite the challenges faced by other retailers post-pandemic, Costco has continued to exhibit strong growth, with earnings per share (EPS) nearly doubling in the past five years. With over 100 million members and membership fees unchanged since 2017, investors are speculating that a price hike for Costco’s membership program could be on the horizon, further driving the company’s growth.
While some may be fixated on the possibility of Costco reaching $1,000 per share and becoming a stock-split candidate, it’s important to shift focus to valuation. Costco currently boasts a price-to-earnings ratio (P/E) of 53, significantly higher than its long-term average of 27, indicating high expectations for the company’s future growth.
Despite Costco’s impressive performance and solid business fundamentals, investors may want to exercise caution before investing in the stock. With a P/E ratio of over 53, Costco is trading at a premium, which may not be justified by its slow-and-steady growth trajectory. Instead of getting caught up in the hype of a potential stock split or reaching $1,000 per share, investors should consider the importance of valuation when making investment decisions.
So, should you invest $1,000 in Costco Wholesale right now? While the company is undoubtedly a strong business, it may be prudent to explore other investment opportunities. The Motley Fool Stock Advisor analyst team has identified what they believe are the 10 best stocks for investors to buy now, and Costco Wholesale didn’t make the cut. By focusing on undervalued stocks with potential for significant growth, investors may be able to achieve substantial returns in the long run.
Ultimately, while Costco’s performance in 2024 has been impressive, it’s important for investors to consider valuation and potential risks before making investment decisions. By staying informed and exploring a diverse range of investment opportunities, investors can position themselves for long-term success in the ever-changing market landscape.