Costco
COST
$989.11
+1.14%
Costco Wholesale Corp operates a global chain of membership-based warehouse clubs, selling high-quality groceries, fresh food, general merchandise, and ancillary services at consistently low prices across roughly 940 warehouses in the US, Canada, and international markets. Its distinct competitive identity rests on a subscription-like membership model with renewal rates near 92% in the US and Canada, which converts a thin-margin, high-volume retail operation into a remarkably durable and predictable earnings engine. The current investor narrative centers on accelerating top-line momentum — September sales reportedly rose 13% with a 19% digital surge — alongside a debate over whether a higher-for-longer rate environment favors defensive value retailers like Costco or pressures its premium multiple. Management's ability to pass through inflation and gas price dynamics while sustaining membership growth is the key swing factor in the bull-bear debate.…
COST
Costco
$989.11
Related headlines
COST 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Costco's 12-month outlook, with a consensus price target around $1066.06 and implied upside of +7.8% versus the current price.
Average Target
$1066.06
0 analysts
Implied Upside
+7.8%
vs. current price
Analyst Count
—
covering this stock
Price Range
$770 - $1315
Analyst target range
Coverage is deep, with 36 analysts and a consensus recommendation of "buy" (mean rating 1.95 on a 1-to-5 scale). The average target price of $1,066.06 implies about 7.8% upside from the current $989.11, a moderate but positive signal, and consensus EPS estimates of $32.63 on average revenue of $437.07 billion suggest analysts expect continued double-digit growth. The bullish tilt is reinforced by recent ratings: Deutsche Bank, Argus, Raymond James, JP Morgan, Mizuho, and Bernstein all carry Buy/Outperform/Overweight stances, while Truist, RBC, and Wells Fargo sit at Hold/Equal Weight.
The target range is wide — $770 low to $1,315 high — signaling meaningful dispersion in assumptions. The high target of $1,315 (about 33% above the current price) likely assumes sustained double-digit sales growth, membership fee upside, and multiple expansion, while the low target of $770 (about 22% below) prices in margin compression, consumer slowdown, or multiple de-rating. The spread of roughly 71% between low and high targets indicates high uncertainty despite the strong consensus, so position sizing should account for the possibility that the stock trades toward the lower end if growth decelerates.
Drowning in data?
Find the real signal!
Bulls vs Bears: COST Investment Factors
The bull case rests on genuinely superior fundamentals: 11.1% revenue growth, 92% renewal rates, 0.24 debt-to-equity, $9.39B free cash flow, and a buy consensus with a $1,066 average target. The bear case is almost entirely about price: 45.4x trailing earnings, 28.4x EV/EBITDA, and a 3.26 PEG already discount roughly 15% EPS growth, while gross margin has slipped from 13.07% to 12.74% and recent sales strength leans on inflation and gas. On balance the evidence favors the bulls on business quality but the bears on near-term risk/reward — the stock is a great company trading at a full price, with only 7.8% implied upside to consensus. The single most important tension is whether the 11.1% top-line growth is real volume share gain or inflation-driven, because that determines whether earnings can grow fast enough to justify a mid-40s multiple. If growth proves structural, the premium is earned; if it fades toward high single digits, the multiple has room to compress toward its 2023 level of roughly 28x.
Bullish
- Revenue growth accelerating to 11.1%: Q4 FY2026 revenue of $95.72B grew 11.1% year-over-year versus $86.16B, well above mature-retail norms. September sales reportedly rose 13% with a 19% digital surge, suggesting momentum has carried into the new fiscal year.
- Membership model drives durable economics: Renewal rates of roughly 92% in the US and Canada convert a 12.74% gross-margin, high-volume model into predictable earnings. Membership fees of $1.36B carry near-100% incremental margin and cushion the thin 3.13% net margin.
- Fortress balance sheet, minimal leverage: Debt-to-equity of just 0.24, interest coverage of 84.5x, and $20.21B of cash support $9.39B TTM free cash flow against only $2.21B capex and $1.30B dividends. ROE of 25.8% and ROA of 8.66% confirm high capital efficiency.
- Analyst consensus buy with 7.8% upside: 36 analysts carry a mean rating of 1.95 (buy) and an average target of $1,066.06, about 7.8% above the $989.11 price. Deutsche Bank, Argus, Raymond James, JP Morgan, Mizuho, and Bernstein are all constructive.
Bearish
- Premium 45.4x PE leaves no margin of safety: Trailing PE of 45.4x and EV/EBITDA of 28.4x are roughly double typical large-format retailer multiples, with a PEG of 3.26. The market is already paying for quality, so any growth stumble would likely trigger multiple compression.
- Gross margin compression year-over-year: Gross margin fell to 12.74% from 13.07% a year earlier, and operating margin is only 3.97%. With net margin at 3.13%, small cost or mix shifts have outsized earnings impact — Q4 EPS of $13.60 came off a 4.41% EBITDA margin.
- Growth partly inflation and gas driven: Recent coverage attributes September's 13% sales growth partly to inflation and gas prices rather than pure volume. If inflation cools, headline comps could decelerate sharply, undermining the 15% earnings growth implied by the 45.4x-to-39.5x PE gap.
- Wide analyst dispersion signals uncertainty: Targets range from $770 to $1,315 — a 71% spread — despite a strong consensus. The low target implies roughly 22% downside, and Truist, RBC, and Wells Fargo sit at Hold/Equal Weight, indicating the bull case is not unanimous.
COST Technical Analysis
Costco is in a choppy but recovering uptrend: the stock is up 6.86% over the past year and 15.75% year-to-date, and at $989.11 it sits at roughly 57.4% of its 52-week range of $844.06 to $1,096.50. That mid-to-upper range positioning reflects a stock that has digested a meaningful drawdown — max drawdown of -18.33% — rather than one pressing against highs, leaving room before momentum becomes overextended. The 52-week high of $1,096.50 remains about 10.9% above the current price, so the stock is still in recovery mode rather than breakout mode.
Short-term momentum has turned decisively positive and is diverging from the softer longer-term trend. The stock is up 10.67% over the past month versus a 5.13% three-month gain, meaning the bulk of the recent move is fresh, and the 1-month relative strength of +9.45 percentage points versus SPY is a strong signal of leadership. Meanwhile the 6-month change of -1.08% and 1-year relative strength of -8.67 points show Costco lagged the market for much of the past year, so this looks like a mean-reversion rally off the September lows near $893 rather than a mature trend — a constructive but still unconfirmed reversal.
Key technical levels are well defined: support sits at the 52-week low of $844.06, with a nearer floor around the $893-$900 area that held in September, while resistance is the 52-week high of $1,096.50. A breakout above that high would confirm a new leg higher and likely draw momentum buyers, whereas a breakdown below $893 would invalidate the recovery and refocus attention on the $844 low. With a beta of 0.87, Costco is roughly 13% less volatile than the market, which supports larger position sizing for risk-managed portfolios but also means it will likely lag in sharp risk-on rallies.
Beta
0.87
0.87x market volatility
Max Drawdown
-18.3%
Largest decline past year
52-Week Range
$844-$1097
Price range past year
Annual Return
+6.9%
Cumulative gain past year
| Period | COST Return | S&P 500 |
|---|---|---|
| 1m | +10.7% | +0.2% |
| 3m | +5.1% | +2.9% |
| 6m | -1.1% | +8.4% |
| 1y | +6.9% | +14.9% |
| ytd | +15.8% | +11.9% |
Bobby - Your AI Investment Partner
Get real-time data, AI-driven personalized investment analysis to make smarter investment decisions
COST Fundamental Analysis
Revenue is growing at a healthy clip: the most recent quarter posted $95.72 billion in sales with 11.1% year-over-year growth, up from $86.16 billion in the prior-year Q4. The sequential quarterly progression — $67.31B, $69.60B, $70.53B, then $95.72B — shows steady expansion, and the segment mix (food and sundries at $27.15B, non-foods at $19.15B, fresh food at $9.89B, other at $12.05B, membership at $1.36B) confirms grocery-led volume is the primary growth driver. The 11.1% growth rate is well above typical mature-retail growth and supports the narrative of share gains and traffic resilience.
Profitability is thin but stable, as expected for the warehouse-club model. Gross margin was 12.74% in the latest quarter, essentially flat versus 12.76% in Q2 and 13.07% a year earlier, while net income reached $2.998 billion on a 3.13% net margin. Operating margin of 3.97% and EBITDA of $4.22 billion show the model converts huge revenue into modest but reliable profit, with membership fees providing a high-margin cushion; the slight gross-margin compression from 13.07% to 12.74% year-over-year bears watching but is not yet a trend break.
Financial health is excellent: debt-to-equity is just 0.24, the current ratio is 1.06, and interest coverage is a very comfortable 84.5x. Free cash flow of $9.39 billion TTM and operating cash flow of $4.69 billion in the latest quarter comfortably fund $2.21 billion of capex and $1.30 billion of dividends, with $20.21 billion of cash on the balance sheet. ROE of 25.8% and ROA of 8.66% confirm high capital efficiency, and the low leverage means Costco can fund growth internally without external financing risk.
Quarterly Revenue
$95.7B
2026-08
Revenue YoY Growth
+11.1%
YoY Comparison
Gross Margin
12.7%
Latest Quarter
Free Cash Flow
$9.4B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
Open an Account, get $2 TSLA now!
Valuation Analysis: Is COST Overvalued?
Because Costco is solidly profitable, the PE ratio is the appropriate primary metric: the trailing PE is 45.4x and the forward PE is 39.5x, a meaningful gap that implies the market expects roughly 15% earnings growth to compress the multiple over the next year. The PEG ratio of 3.26 and price-to-sales of 1.38x (with EV/sales at 1.39x) frame a stock priced for continued steady compounding rather than deep value.
Against the broader discount-stores and consumer-defensive peer set, Costco's 45.4x trailing PE and 28.4x EV/EBITDA represent a substantial premium — roughly double the multiple typical of large-format retailers — which the market justifies through superior membership economics, 92% renewal rates, and consistent mid-teens EPS growth. The 11.7x price-to-book and 26.5x price-to-cash-flow ratios reinforce that investors are paying for quality and predictability, not for a margin-of-safety discount.
Historically, Costco's PE has ranged from about 28x (2023) to 66x (early 2025), and the current 45.4x sits in the middle-to-upper portion of that band. The trailing PE has compressed from 55.6x in Q2 2026 to 45.4x now, suggesting the multiple is normalizing as earnings catch up — a healthier setup than the stretched levels of early 2025, though still well above the 2023 lows.
PE
45.4x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 28x~59x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
28.4x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are modest but real. The warehouse model runs on a 12.74% gross margin and 3.97% operating margin, so a one-point margin swing is enormous relative to the 3.13% net margin; gross margin already slipped from 13.07% a year earlier. Revenue is concentrated in groceries (about 55% of fiscal 2025 revenue) and in the US (roughly 73% of sales), leaving the company exposed to food deflation and US consumer weakness. Leverage is not a concern — debt-to-equity of 0.24, interest coverage of 84.5x, and $20.21B cash — but the valuation itself is a financial risk: at 45.4x trailing earnings, the stock depends on continued mid-teens EPS growth to avoid de-rating.
Market and competitive risks center on multiple compression and macro sensitivity. At 45.4x PE, 28.4x EV/EBITDA, and 11.7x price-to-book, Costco trades at roughly double typical large-format retail multiples; a rotation away from consumer defensives or a rise in real yields would hit a premium multiple hardest. Recent news highlights a Fed with "no tolerance" for inflation and the possibility of further rate hikes, which pressures consumer spending even as it favors value retailers — a double-edged setup. Competition from Walmart, Sam's Club, and Amazon in grocery and digital is persistent, and Costco's 19% digital surge must be sustained to defend share. Beta of 0.87 means the stock offers some downside cushion but will also lag in sharp risk-on rallies, and its 1-year relative strength of -8.67 points versus SPY shows it has already been a laggard.
The worst-case scenario is a growth scare colliding with a premium multiple: inflation cools, headline comps decelerate from 13% toward mid-single digits, gross margin stays near 12.7%, and the market re-rates the stock toward its 2023 PE of roughly 28x. Applied to consensus EPS of $32.63, that implies a price near $914 — about 8% below the current $989.11 — and a more severe de-rating toward the analyst low target of $770 would mean roughly 22% downside. The 52-week low of $844.06 represents about 15% downside from here, and the stock has already demonstrated an 18.33% max drawdown. A realistic adverse case is a decline of 15% to 22%, taking the shares to the $770-$844 range.