Is the Investment Opportunity in Costco Over?
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Apr 04 2026
0mins
Should l Buy COST?
Source: Yahoo Finance
- Membership Model Advantage: Costco's collection of membership fees creates an annuity-like income stream, allowing the company to compete aggressively on price, which attracts more customers and drives continuous revenue growth.
- Price Drawdown Analysis: Although Costco's stock fell nearly 20% in the second half of 2025, historical data shows that the stock has experienced drawdowns of 15% or more multiple times over the past decade, typically viewed as buying opportunities.
- Valuation Level Changes: Currently, Costco's price-to-sales, price-to-earnings, and price-to-book ratios are all above their five-year averages, indicating that the stock appears expensive under traditional valuation metrics, especially since the P/E ratio remained at 45x during the recent drawdown.
- Investor Recommendations: While Costco may still appeal to aggressive growth investors during drawdowns, caution is advised regarding its high valuation relative to historical levels and the broader market, suggesting it should be kept on a watchlist for future significant pullbacks.
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Analyst Views on COST
Wall Street analysts forecast COST stock price to rise
24 Analyst Rating
19 Buy
4 Hold
1 Sell
Strong Buy
Current: 1032.030
Low
769.00
Averages
1061
High
1205
Current: 1032.030
Low
769.00
Averages
1061
High
1205
About COST
Costco Wholesale Corporation (Costco) operates membership warehouses and e-commerce sites that offer a selection of nationally branded and private-label products in a wide range of categories. The Company buys the majority of its merchandise directly from suppliers and route it to cross-docking consolidation points (depots) or directly to its warehouses. It operates 891 warehouses, including 614 in the United States and Puerto Rico, 108 in Canada, 40 in Mexico, 35 in Japan, 29 in the United Kingdom, 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, and one each in Iceland, New Zealand and Sweden. It also operates e-commerce sites in the United States, Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia. The Company provides wide selection of merchandise, plus the convenience of specialty departments and exclusive member services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Costco's Steady Profit Growth Explained
- Steady Profit Growth: Costco's diluted earnings per share (EPS) increased at a compound annual growth rate of 13% from fiscal 2015 to fiscal 2025, demonstrating its strong profitability and market adaptability.
- Strong Market Position: As of Q2 2026, Costco reported net sales of $68 billion, making it the third-largest retailer globally, and its limited stock-keeping units enhance its negotiating power with suppliers, keeping costs low.
- High Customer Loyalty: With a renewal rate of 92.1% in the U.S. and Canada, Costco effectively attracts and retains customers through low prices, a no-frills shopping environment, and quality merchandise, driving sales growth.
- Significant Valuation Pressure: Despite a strong start in 2026 with a 17% stock price increase, Costco's price-to-earnings ratio stands at 52.9, reflecting market optimism about its future, prompting investors to be cautious and wait for a more reasonable entry point.
See More
Costco Raises Membership Fees for First Time in Seven Years
- Membership Fee Increase: Costco raised its membership fee from $120 to $130 in 2024, marking the first increase in seven years, reflecting the company's confidence in its brand and customer loyalty, with potential for further fee hikes to drive profit growth.
- Sales Revenue Analysis: For the first 24 weeks of fiscal year 2026, Costco generated $134.2 billion in net sales, with only $15 billion in operating income after deducting merchandise costs, indicating fierce competition in retail and tight profit margins.
- Membership Fee Contribution: During the same period, Costco's membership fee revenue reached $2.68 billion, nearly all of which is profit, pushing total operating income to over $5 billion, highlighting the critical role of membership fees in the company's financials and ensuring profitability.
- Stable Renewal Rates: Management reported a 92.1% renewal rate for U.S. and Canadian members, down just 0.1%, with the 2024 price increase accounting for one-third of membership fee growth, demonstrating strong brand power and customer loyalty, suggesting potential for accelerated fee growth in the future.
See More
Costco Membership Fees Drive Profit Growth
- Membership Fee Increase: In 2024, Costco raised its premium membership fee from $120 to $130, and despite a mere 0.1% decline in renewal rates, membership fee growth accounted for one-third of quarterly revenue, highlighting strong brand loyalty and profit potential.
- Sales Revenue Analysis: For the first 24 weeks of fiscal year 2026, Costco reported net sales of $134.2 billion with an operating income of $15 billion, reflecting a thin profit margin of 11.1% in a fiercely competitive retail market.
- Profit Model Dependency: During the same period, membership fees generated $2.68 billion in revenue, nearly all of which was profit, pushing total operating income above $5 billion, indicating that the membership model is central to the company's profitability.
- Future Growth Potential: Management anticipates an average annual earnings growth rate of 10% for Costco over the next three to five years, with the possibility of more frequent membership fee adjustments to enhance profitability, although they must tread carefully to avoid damaging brand value.
See More
Costco Raises Membership Fees for First Time in Seven Years
- Membership Fee Increase: Costco raised its membership fee to $130 from $120 in 2024, marking the first increase in seven years, which is expected to enhance profitability in a fiercely competitive retail landscape.
- Sales Performance: For the first 24 weeks of fiscal year 2026, Costco generated $134.2 billion in net sales, with only $15 billion in operating income after merchandise costs, reflecting its low-margin business model.
- Renewal Rates: Management reported a 92.1% renewal rate for U.S. and Canadian members, down just 0.1%, while the 2024 price hike accounted for one-third of membership fee growth, indicating strong brand loyalty.
- Future Growth Potential: Analysts estimate Costco's earnings growth will average 10% annually over the next three to five years, with membership fee increases likely to accelerate this trend, suggesting room for further price hikes in the future.
See More
Investment Opportunities in Costco and Dutch Bros
- Costco Financial Performance: In the first half of fiscal 2026, Costco reported revenues of $137 billion, a 9% increase year-over-year, while profits surged 13% to $4 billion, demonstrating the company's strong resilience amid economic uncertainties.
- Valuation Analysis: Despite Costco's P/E ratio standing at 53, significantly above the five-year low of 40, historical trends suggest that if the P/E drops below 30, investors could achieve market-beating returns, indicating potential overvaluation risks at current prices.
- Dutch Bros Expansion Plans: By the end of 2025, Dutch Bros had 1,136 locations and plans to open 2,029 new stores by 2029, which is expected to drive its revenue to exceed $1.6 billion in 2025, reflecting a robust growth trajectory of 28%.
- Market Competitiveness: Although Dutch Bros has a high P/E ratio of 84, its price-to-sales ratio of 4.3 has recently declined, and if it falls below Starbucks' 2.9, historical data suggests a potential surge in stock price, offering investors a chance for market outperformance.
See More
Middle East Conflict Affects Investor Sentiment
- Cautious Market Sentiment: Amid rising geopolitical tensions from the Middle East conflict, investors are reducing stock holdings or delaying purchases, reflecting uncertainty about future market performance, which could negatively impact overall market dynamics.
- Costco Financial Performance: In the first half of fiscal 2026, Costco reported $137 billion in revenue, a 9% increase year-over-year, with profits reaching $4 billion, up 13%, demonstrating resilience amid economic uncertainty, although its 53 P/E ratio may no longer be justified.
- Dutch Bros Expansion Plans: Dutch Bros achieved over $1.6 billion in revenue in 2025, a 28% increase, and plans to open 2,029 new locations by 2029, showcasing its rapid expansion potential; despite a high P/E ratio of 84, investors remain hopeful for future returns.
- Investment Opportunity Assessment: In light of a potential bear market, investors are advised to compile a wish list of stocks to buy if prices fall, particularly considering the potential value in Costco and Dutch Bros, which may offer market-beating returns.
See More
Costco's Steady Profit Growth Explained
- Steady Profit Growth: Costco's diluted earnings per share (EPS) increased at a compound annual growth rate of 13% from fiscal 2015 to fiscal 2025, demonstrating its strong profitability and market adaptability.
- Strong Market Position: As of Q2 2026, Costco reported net sales of $68 billion, making it the third-largest retailer globally, and its limited stock-keeping units enhance its negotiating power with suppliers, keeping costs low.
- High Customer Loyalty: With a renewal rate of 92.1% in the U.S. and Canada, Costco effectively attracts and retains customers through low prices, a no-frills shopping environment, and quality merchandise, driving sales growth.
- Significant Valuation Pressure: Despite a strong start in 2026 with a 17% stock price increase, Costco's price-to-earnings ratio stands at 52.9, reflecting market optimism about its future, prompting investors to be cautious and wait for a more reasonable entry point.
See More
Costco Raises Membership Fees for First Time in Seven Years
- Membership Fee Increase: Costco raised its membership fee from $120 to $130 in 2024, marking the first increase in seven years, reflecting the company's confidence in its brand and customer loyalty, with potential for further fee hikes to drive profit growth.
- Sales Revenue Analysis: For the first 24 weeks of fiscal year 2026, Costco generated $134.2 billion in net sales, with only $15 billion in operating income after deducting merchandise costs, indicating fierce competition in retail and tight profit margins.
- Membership Fee Contribution: During the same period, Costco's membership fee revenue reached $2.68 billion, nearly all of which is profit, pushing total operating income to over $5 billion, highlighting the critical role of membership fees in the company's financials and ensuring profitability.
- Stable Renewal Rates: Management reported a 92.1% renewal rate for U.S. and Canadian members, down just 0.1%, with the 2024 price increase accounting for one-third of membership fee growth, demonstrating strong brand power and customer loyalty, suggesting potential for accelerated fee growth in the future.
See More
Costco Membership Fees Drive Profit Growth
- Membership Fee Increase: In 2024, Costco raised its premium membership fee from $120 to $130, and despite a mere 0.1% decline in renewal rates, membership fee growth accounted for one-third of quarterly revenue, highlighting strong brand loyalty and profit potential.
- Sales Revenue Analysis: For the first 24 weeks of fiscal year 2026, Costco reported net sales of $134.2 billion with an operating income of $15 billion, reflecting a thin profit margin of 11.1% in a fiercely competitive retail market.
- Profit Model Dependency: During the same period, membership fees generated $2.68 billion in revenue, nearly all of which was profit, pushing total operating income above $5 billion, indicating that the membership model is central to the company's profitability.
- Future Growth Potential: Management anticipates an average annual earnings growth rate of 10% for Costco over the next three to five years, with the possibility of more frequent membership fee adjustments to enhance profitability, although they must tread carefully to avoid damaging brand value.
See More
Costco Raises Membership Fees for First Time in Seven Years
- Membership Fee Increase: Costco raised its membership fee to $130 from $120 in 2024, marking the first increase in seven years, which is expected to enhance profitability in a fiercely competitive retail landscape.
- Sales Performance: For the first 24 weeks of fiscal year 2026, Costco generated $134.2 billion in net sales, with only $15 billion in operating income after merchandise costs, reflecting its low-margin business model.
- Renewal Rates: Management reported a 92.1% renewal rate for U.S. and Canadian members, down just 0.1%, while the 2024 price hike accounted for one-third of membership fee growth, indicating strong brand loyalty.
- Future Growth Potential: Analysts estimate Costco's earnings growth will average 10% annually over the next three to five years, with membership fee increases likely to accelerate this trend, suggesting room for further price hikes in the future.
See More
Investment Opportunities in Costco and Dutch Bros
- Costco Financial Performance: In the first half of fiscal 2026, Costco reported revenues of $137 billion, a 9% increase year-over-year, while profits surged 13% to $4 billion, demonstrating the company's strong resilience amid economic uncertainties.
- Valuation Analysis: Despite Costco's P/E ratio standing at 53, significantly above the five-year low of 40, historical trends suggest that if the P/E drops below 30, investors could achieve market-beating returns, indicating potential overvaluation risks at current prices.
- Dutch Bros Expansion Plans: By the end of 2025, Dutch Bros had 1,136 locations and plans to open 2,029 new stores by 2029, which is expected to drive its revenue to exceed $1.6 billion in 2025, reflecting a robust growth trajectory of 28%.
- Market Competitiveness: Although Dutch Bros has a high P/E ratio of 84, its price-to-sales ratio of 4.3 has recently declined, and if it falls below Starbucks' 2.9, historical data suggests a potential surge in stock price, offering investors a chance for market outperformance.
See More
Middle East Conflict Affects Investor Sentiment
- Cautious Market Sentiment: Amid rising geopolitical tensions from the Middle East conflict, investors are reducing stock holdings or delaying purchases, reflecting uncertainty about future market performance, which could negatively impact overall market dynamics.
- Costco Financial Performance: In the first half of fiscal 2026, Costco reported $137 billion in revenue, a 9% increase year-over-year, with profits reaching $4 billion, up 13%, demonstrating resilience amid economic uncertainty, although its 53 P/E ratio may no longer be justified.
- Dutch Bros Expansion Plans: Dutch Bros achieved over $1.6 billion in revenue in 2025, a 28% increase, and plans to open 2,029 new locations by 2029, showcasing its rapid expansion potential; despite a high P/E ratio of 84, investors remain hopeful for future returns.
- Investment Opportunity Assessment: In light of a potential bear market, investors are advised to compile a wish list of stocks to buy if prices fall, particularly considering the potential value in Costco and Dutch Bros, which may offer market-beating returns.
See More
