Jim Cramer on Costco: "It is a Victim of its Own Success"

Costco Wholesale Corporation (NASDAQ:COST) is one of the stocks that Jim Cramer shed light on. Noting that the stock is down from its highs, a caller asked if they should add to their position or wait for tariff updates. Cramer replied:

“No, look, here’s the problem with Costco: It is a victim of its own success. All it really does is ever go up and then has these periods where it languishes. We’re in the languish period. That’s when you buy Costco. Do I think Costco’s in trouble at 50 times earnings? Are you kidding me? I think Costco’s, I still think Costco may be… one of the top five companies of all time. That is no slight to Jensen Huang because he’s number one.”

omar-abascal-9Um7Huux0as-unsplash Costco (NASDAQ:COST) operates a membership-based warehouse model. The company provides a selection of brand-name and private-label products in bulk at reduced prices through this structure. On July 10, Cramer extensively commented on the company and stock as he said:

“There was a lot of talk about Costco, same store sales, not great… Costco, which reported June monthly sales last night after the close, delivered 5.5% US comparable sales growth, ex gasoline, when the Street was looking for a 6. Woo, disappointing, right? How disappointing? How about enough to send the stock down almost 12 points today? Is that wrong or is that right? I think it’s wrong. I like Costco, the store, very much, and I’m always looking for a chance to buy Costco, the stock, on weakness for the Charitable Trust… And boy is it ever tempting if we didn’t own so much Costco already to do some buying. Why? Well, Costco’s been a long-time position of the trust because I love to shop there, and I love the business model where the company offers a limited number of goods at ultra-low prices and makes its money on your membership dues. The most articulate defender of Costco was the late Charlie Munger, Warren Buffett’s right-hand man on the board of Berkshire Hathaway… To me, Costco’s hundred-point discount from its high is about as good as you’re going to get. JPMorgan, which has a Buy on the stock, says that Costco has been a ‘source of funds for big institutions of late,’ but they think that’s about to come to an end as the year-over-year comparisons are going to get easier. Now go back to what I said about how much of Wall Street acts like there’s never a good time to buy these high-quality stocks. I think the truth is the opposite. There’s always a good time to buy shares in a great company, and it’s when the conventional wisdom says that a 5.5% same-store sales number, much better than almost any other company I follow, is somehow a real shortfall. I think Costco’s an amazing company, and this is the kind of buying opportunity that just doesn’t come along very often.”

While we acknowledge the potential of COST as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy Right Now. Disclosure: None. This article is originally published at Insider Monkey.