Amit Chokshi

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  • Costco: Overpriced for Its Growth Rate
    Rich,

    Why would I short the RTH which includes a variety of beaten down megacap retailers? Those are the ones that have much more attractive valuations, 12-14x forward EPS for companies like KSS, WMT, TGT vs 20+x forward EPS for COST? COST's growth is basically food and fuel inflation, investors are paying those lofty multiples for a grocery company at this point since its discretionary items are doing much worse.

    I've illustrated in this post and the initial one a few months ago that COST has very specific issues regarding how its valued by the market.

    I would also say that the "intangibles"... are fine, it's a great company but those intangibles you mention are more than reflected in its valuation. It's not much different than how TGT was perceived earlier this year, it has the "it" factor towards middle america. Other intangibles regarding the quality of the consumer extended to COH, HOG, etc. and it was not that long ago that SBUX had a variety of attractive intangibles before Street sentiment changed.

    Finally, the growth angle will have no relevance to COST right now. The market won't care if COST grows sales by 10-12% but comp store sales are 2%.
    Feb 14 14:27 pm |Rating: 0 0 |Link to Comment |View article

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