The 2020 pandemic hit many companies hard, while other companies took it as a chance to grow, seemingly unaffected by the state of the world around them. NVIDIA (NASDAQ:NVDA) came out as one of those thriving businesses and achieved gains of 122% in 2020. The company’s graphics processing units (GPUs) were present and needed for trends that accelerated exponentially due to the pandemic, boost...
Out of all the retail-based businesses in the market, the one that has probably been handling the COVID-19 pandemic the best is Costco Wholesale (NASDAQ: COST) by far.
By rapidly capitalizing on its clientele’s changing customer habits and developing an entirely new business model focused on the utmost essentials, Costco managed to obtain astounding growth in its 2020 sales. In due time, this eventually allowed for its market shares to gain significant value during one of the economy’s most recent lowest points.
However, with several successful efforts already underway to finally tame the pandemic, investors are now worrying that Costco’s winning streak is soon coming to a close.
Nevertheless, we beg to differ. We think that Costco’s sales will only continue to grow with time.
Here are some of our reasons to believe in the coming of this scenario.
A stellar year for growth
As already stated above, Costco’s sales were greatly influenced by the pandemic’s first appearance. As people quickly stocked up on food and other necessities, Costco’s numbers saw themselves catapulting just as quickly.
This initial event took place in February 2020 when Costco’s jumped up 11.7% in its revenue numbers. For comparison, January 2020 had only seen a 5.3% increase from the month before.
In addition, Costco also managed to keep a double-digit growth for the rest of 2020’s fiscal year. It all came up to average growth of 9.2% in a single year by the end of it.
For the early fiscal months of 2021, Costco has kept its momentum by surging up to an average of 14.7%. It can be expected for the company to keep this track for the remainder of the year.
A growth capable of holding up
Part of the reasoning behind many investors’ most recent fears regarding Costco’s future is the ongoing and successful recovery process that many of its competitors are currently going through.
Their train of thought is as follows: as the market has been getting closer to where it once was, many other retail businesses have been able to get some of the clientele’s attention once again.
To a certain degree, it is safe to assume that with a broader array of possible shopping options, customers will more openly vary their purchasing habits from now on. In essence, Costco would then be facing significant sales losses, as it would no longer be the only viable option.
However, the main issue with these assumptions is that, first of all, Costco’s growth was kick-started specifically by the rising need for food and other essentials. In reality, if the market is genuinely turning back into what it once was, then it also means that the purchase of non-essentials is no longer out of the question.
In other words, people are free once again to buy anything out of Costco’s entire catalogue. Costco is more than well covered with this returning opportunity when it comes to keeping its high sales numbers.
In March, Costco rose 11.1%, with 50% of said growth attributed to the purchase of non-food merchandise. So it stands to reason to believe that Costco’s journey is far from over.
What it all means for investors
As Costco has done well in its efforts to maintain double-digit growth for over a year now, with evidence supporting this claim as to March 2021, investors should be more than confident in the company handing out positive comps for the rest of the year.
Still, its stocks’ current value remains somewhat pricey compared to its projected earnings for fiscal 2021. However, with its resilience with every passing day and its stellar performance, one could quickly expect said investment to bring upon remarkable returns in the long run.
So, in the end, our recommendation would be to invest in Costco if you are looking for a significant long-term investment.