Costco’s Resilience Proves Its Ongoing Relevance and Brand Strength; Shares Fairly Valued

We don’t plan a material change in our $476 fair value estimate for wide-moat Costco after digesting fiscal 2023 second-quarter results that came in a touch below our estimates. Its total revenue of $55.3 billion (up 6.5%) and operating margin of 3.4% fell short of our estimates of $55.8 billion and 3.5%, respectively. Nonetheless, we maintain our projections for mid- to high-single-digit annual revenue growth and operating margins around 4% over our 10-year explicit forecast, as our long-term prospects for the business remains intact. With shares trading near our existing intrinsic valuation, we’d suggest investors await a more attractive entry point.