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Costco, Gap and Opendoor Report Earnings

A mixed bag of quarterly results.
(Juan Llauro)
(Juan Llauro)
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Costco enjoyed rising sales in the latest quarter as Americans continue to stock up on food and goods during the pandemic, WSJ reports.

Numbers To Consider:

  1. Revenue for the wholesaler increased to $44.77 billion in the quarter ending Feb.14, a 15% rise from the year-ago period.
  2. Costco notched a quarterly profit of $951 million, jumping up from $931 million.

With consumers gaining interest in apparel, Gap predicts a rebound in the second half of 2021 after a rough 2020, WSJ reports.

Numbers To Consider:

  1. Gap posted $6 billion in online sales for its fiscal year ending January 30, representing 45% of total sales. Just the year before, digital-only made up 25% of Gap’s business.
  2. The retailer landed a profit of $234 million for the fourth quarter. It pulled a $184 million loss in the same period one year earlier.

Opendoor recorded a startling drop in revenue as it reported its first quarterly earnings, saying in a press release it “began rebuilding inventory in the fourth quarter, and expects to return to sequential revenue growth in the first quarter of 2021,” The Information reports.

Numbers To Consider:

  1. The company, which makes money by “selling suburban single-family homes,” saw a revenue drop of 80% in Q4 to $249 million from $1.3 billion in Q4 2019.
  2. Opendoor went public through a SPAC merger in November that raised net proceeds of $970 million.

Justin Oh:

It’s not just tech stocks that are falling. The market is very optimistic about Covid-19 vaccinations and a quick return-from-home economy. Thus, labeled as a stay-at-home stock, Costco ($COST) is down 13% during this sell off. 

We’ve avoided the stay-at-home retailers like Walmart, Costco, and Target because of their valuations being inflated about 30% from historical averages. But at $311 per share, Costco now trades at 16.5x forward EBITDA, which is a level not seen since 2018. If $COST gets any cheaper, I may be looking to buy some of this amazing company…

Gap Inc ($GPS) doesn’t look unreasonably priced at $27, but it doesn’t inherently make a ton of sense to me why I’d be salivating over it. $GPS is trading for a $10 billion valuation, which is higher than in 2019.

$OPEN is down almost 14% today on earnings. We haven’t liked Opendoor ($OPEN) since it went public, and I believe it trades with a Chamath premium. From Morning Cents 10/6: “The company is still heavily money-losing, and the core business model is very low-margin on a heavy capital investment. iBuyers will need to rely heavily on cheap debt to make the business work on a Return-on-Equity basis.”

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