Why I Sold Costco Stock Despite Surging Sales

Earlier this year, I bought shares of Costco Wholesale (NASDAQ: COST) during a pullback, expecting to hold them for a long time. With its massive purchasing power, rock-bottom prices, and customer loyalty, Costco has one of the deepest moats in the retail industry.

Costco has demonstrated the strength of its business in impressive fashion in recent months, causing Costco stock to rally far beyond its previous high. That has driven its valuation to new heights, requiring increasingly aggressive growth assumptions to justify the share price. As a result, while I continue to have great confidence in the business, I recently sold all of my Costco stock.

Costco Wholesale was one of the retail industry's pandemic-era winners, as consumers looked to cut down on shopping trips by buying in bulk. Adjusted comparable sales (excluding the impact of changes in gas prices and foreign exchange rates) grew 9.2% in fiscal 2020, with double-digit growth in the second half of the fiscal year (roughly corresponding to the first six months of the pandemic).

Source Fool.com