Costco announced a 15.5% growth in net sales. What is the impact on share price?

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Costco Wholesale Corporation (NASDAQ:COST) regularly updates the markets about its performance. In the latest update focused on January 2022 revenues, COST reported net sales at $15.76 billion.

By comparison, the revenues are 15.5% higher than the $13.64 billion from the same period last year. The growth rates have been sustained month on month for comparable periods, but investors should cautiously utilize the revenue growth information.

Revenue growth at COST is a result of two important macroeconomic dynamics. The first is the return to normalcy in consumer behavior after the pandemic. The second factor is the growing rate of inflation.

Upward adjustment of prices in response to the growing inflation contributes to the growth in revenues. Investors should also consider that the growth in revenues would be accompanied by increases in costs.

The question for investors, therefore, is whether the revenues are growing faster than the costs. The fundamental analysis finds that net growth is in the mid-single-digit region.

MA 10 and 20 Converged at $514 for COST

Source – TradingView

Technical analysis of the stock shows a sustained upward momentum. MA 20 hardly touches MA 50. There are only a few instances where MA 10 converges with MA 20. One of the few instances of convergence just occurred at $514, signaling a potential downward trend in the short term.

MPS is already at $512, confirming the potential downward trend. The share price is expected to oscillate around the current valuation. If the macroeconomic risk levels increase, COST will find support at $447, equal to MA 50.

Summary

COST reported 15.5% growth in monthly net sales for January on a comparative basis. Growth is driven by inflation-related price adjustments. Net growth should be expected in the mid-single-digit region. COST is a recommended hold at the current MPS.

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