At this time last year, we were beginning to feel some enthusiasm that the novel coronavirus pandemic would be brought under control. Vaccination was underway, lockdowns were in the rearview mirror, air travel was picking up and there was plenty more to be optimistic about. Driven by factors like increased e-commerce sales and stimulus spending, Costco Wholesale (NASDAQ:COST) stock delivered a return of over 50% for the year.
2022 has proven to be a very different year. Inflation is at a 40-year high, gas prices are at record highs, interest rates are rising and there is war in Ukraine. Moreover, Covid-19 variants have proven impossible to stamp out. So, overall, this has not been a recipe that is favorable for traditional growth stocks.
The market, in general, has undergone a significant contraction through 2022, but tech stocks are really feeling it. In fact, the Nasdaq-100 is down nearly 15% so far this year.
However, while many tech stocks continue to falter, COST stock is back in growth mode. On April 7, shares hit a price of $608.05, setting a new all-time high close. COST gave some of that back, but it’s on the rise again this week. At this point, it is up about 4% for 2022. And with plenty more catalysts ahead, now is the time to buy Costco stock if you’re looking for an investment that can perform despite the many challenges of this year.
An Impressive Q1 Earnings Beat
The first sign that Costco was performing better than many companies in 2022 was on March 3. That’s the date the company reported its second-quarter earnings.
Net sales for the quarter were $50.94 billion, up 16.1% year-over-year (YOY). Additionally, e-commerce sales grew 12.5% YOY, showing that the company’s online shopping presence had received a permanent boost from the pandemic. Also, revenue beat analyst expectations, and so did the company’s earnings per share (EPS) of $2.92, which was up 36% YOY.
Nonetheless, the market reaction to Costco’s earnings was muted. But from that point on shares stabilized and then kicked into recovery mode.
The Impact of Inflation and Rising Interest Rates
Back in early February — when COST stock was still in the midst of a pullback — I wrote about the buying opportunity.
My pro-Costco argument was that this is a retailer that is not only resistant to the effects of inflation and rising interest rates, but Costco could also actually benefit from these economic pressures. The theory behind that reasoning goes like this: When prices increase and consumer buying power decreases, big-ticket extras tend to suffer. But the race is on to save money on essentials. There’s an instinct to stockpile, and Costco offers the ultimate cost-saving option in discounted prices on bulk quantities.
On the day that article was published, COST stock closed at $522.02, by the way. It’s up more than 13% since then.
Part of that impressive Costco stock performance has been data released by the company proving its strength during these trying economic times. At the start of April, the company announced that sales during March had been stronger than ever. In fact, for the five weeks ending April 4, they were up 18.7% compared to a year ago.
Of course, no one is saying that sky-high inflation and rising interest rates are a good thing. However, for Costco investors, the combination isn’t nearly as worrisome.
Bottom Line on COST Stock
At the end of the day, you want the growth stocks in your portfolio to — well, grow. Many traditional growth stocks including tech stocks have struggled in 2022. However, Costco shares have powered through early weakness to move into positive territory for the year. They earn an “A” rating in Portfolio Grader as well.
At this point, COST stock is a solid investment for the economic circumstances. And the longer you wait to make a move, the more expensive it’s going to be.
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Originally published on InvestorPlace.com
On the date of publication, Louis Navellier had a long position in AMZN. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
