Wall Street’s Most Anticipated Stock Split of the 4th Quarter May Be Announced This Week
2024-09-23 11:51:00
For much of the last two years, Wall Street and investors have been fixated on the artificial intelligence (AI) revolution. But what they might not realize is how important stock-split euphoria has been for pushing Wall Street’s major indexes higher in 2024.
A stock split is a tool public companies have at their disposal that allows them to superficially adjust their share price and outstanding share count by the same factor. Splits are surface-scratching in the sense that they don’t alter a company’s market cap or in any way affect its underlying operating performance.
Unmasking Costco’s recipe for success
While the stage is undeniably set for Costco Wholesale to wow Wall Street with a stock split, the company’s underlying operations continue to fire on all cylinders.
Costco’s recipe for success begins with the advantage it possesses from its sheer size. Being able to purchase products in bulk helps to lower the per-unit cost of each item. Ultimately, this allows the company to undercut local shops and national grocery chains on price and provide a value proposition to consumers that keeps them coming back.
Costco is also a consumer staples stock. This is to say that it sells a variety of basic need goods that consumers are going to buy regardless of how well or poorly the U.S. economy is performing, such as food, beverages, and household cleaning/sanitary products. It has a lure to drive traffic into its stores in any economic climate.
Another key ingredient to Costco’s success story is its membership-based operating model. The $65 and $130 annual fees Costco collects from its members is high margin and flows straight to its bottom line. These fees provide an even firmer margin buffer that allows the company to undercut its peers on price to drive membership growth.
Last but not least, paying for an annual membership tends to incent loyalty in shoppers. Consumers will want to get the most out of their membership and are, therefore, more likely to head to Costco for their big-dollar purchases. Getting consumers into its stores is half the battle — and it’s one that Costco has been winning for decades.
Should you invest $1,000 in Costco Wholesale right now?
Before you buy stock in Costco Wholesale, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Costco Wholesale wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $710,860!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 16, 2024
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Wall Street’s Most Anticipated Stock Split of the 4th Quarter May Be Announced This Week was originally published by The Motley Fool
