Costco Stock Fell Around 8% in 3 Days, Is This The Right Time to Exit Their Positions?

Retail industry plays the most crucial roles in our daily lives. Companies persisting in this sector can easily be influenced by consumer demand, which eventually can be impacted by factors like inflation, war and more. Recently, one of the leading retail companies, Costco Wholesale (NASDAQ: COST), saw a downfall in their shares. Costco stock fell by around 8% in 3 days.

Consumers Still Have The Buying Power

The organization has established itself in a fine tune within the industry over the past few years. Though the consumers still have the buying power, the falling company stock tells a whole different story. The reduction indicates declined spending in the market and may impact the share value if the scenario persists.

Recent financials show that the company lagged behind their revenue as well as Earnings Per Share during the latest quarter earnings. The organization generated $54.44 Billion, $3.92 Billion less than the estimate. Similarly, they produced $3.07 EPS with a surprise of (1.49%).

Costco Stock Price Analysis

The chart shows that Costco stock has lost over 24% since their yearly high in 2022. A regression trend shows a steep decline during April 2022 and May 2022, then entered the buyers which gave the value a little push. A head and shoulder pattern is visible from July 2022 to mid-September 2022, creating a slope ending in mid-October.

Another regression trend indicates that Costco stock has arrived in a buyers zone with relative strength index (RSI) supporting the scenario. Currently, the price holds a support zone between $448 and $450 and resistance levels between $543 and 545 as the year comes to a close.

E-commerce is increasingly becoming an important segment in the retail industry, Costco can increase its gains by leveraging this factor. The US retail sector has grown by 3.1% in 2020 to 19.4% in 2021. Still the brick and mortar stores have kept their dominance over the country. According to the data, 76% of the nation’s population still prefer to shop from physical stores.

In the United States, brick and mortar stores hold 87% of the market share while e-commerce merely 13%. Currently, Walmart (NYSE: WMT) remains the biggest retail organization by sales having generated $430.82 in 2020, meanwhile, Dollar General (NYSE: DG) holds the crown for largest retailer by store count, having 17,348 stores under control. With respect to employment, the retail sector is currently the no.1 employer countrywide.

Data shows that the GenZ population is more inclined towards online shopping with 87% involved in e-commerce, followed by millennials (67%), GenX (56%) and Baby Boomers (41%). With inflation increasing in the US and many other nations, the company may see a downturn by next year. 

Increased inflation has a direct effect on essential aspects required for a brick and mortar store like electricity, warehousing, supply chain and more. Moreover, it also decreases consumer spending, leading to fewer customers in the sector. While the majority of the factors indicate a potential downfall in Costco stock price, e-commerce may still help the company to taste some positive gains in future.