Stock Markets Are Once Again Dependent on the TACO Trade: Here's Why That's Problematic.
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 22 2026
0mins
Should l Buy COST?
Source: Barron's
TACO Acronym: TACO stands for "Trump Always Chickens Out," reflecting a pattern observed by investors regarding tariff threats.
Investor Guidance: The acronym has been a useful indicator for investors navigating the uncertainties surrounding tariff discussions, particularly those related to Greenland.
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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: 979.920
Low
769.00
Averages
1061
High
1205
Current: 979.920
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.
Reasons Behind Costco's High Valuation
- Strong Comparable Sales: Costco's comparable store sales increased by 7.4% year-over-year in fiscal Q2, with a 6.7% growth after excluding gasoline and foreign exchange impacts, demonstrating the company's core value proposition continues to resonate with consumers and solidifying its market position.
- International Expansion Potential: With 924 warehouses globally as of Q2, mostly in North America, Costco's 'Other International' segment saw a 13% increase in comparable sales, indicating significant future expansion potential in underpenetrated markets in Europe and Asia.
- Digital Sales Surge: The company's digitally enabled comparable sales surged 22.6% in fiscal Q2, with e-commerce site traffic up 32% and mobile app traffic up 45%, showcasing successful digital transformation efforts that are expected to drive future sales growth.
- Robust Net Income Growth: Costco's net income for fiscal Q2 surged 13.8% year-over-year to over $2 billion, reflecting strong profitability alongside robust sales growth, although the high valuation warrants cautious consideration.
See More
Costco's Steady Growth and Expansion Potential
- Strong Sales Growth: Costco's comparable store sales increased by 7.4% year-over-year in fiscal Q2 2023, with a 6.7% growth after excluding gasoline prices and foreign exchange impacts, demonstrating the company's core value proposition resonates with consumers, thereby enhancing its competitive position in the retail market.
- International Expansion Potential: As of the second quarter, Costco operates 924 warehouses globally, predominantly in North America, while its 'Other International' segment saw a 13% increase in comparable sales, highlighting significant expansion potential in underpenetrated markets in Europe and Asia, with plans for 28 new warehouse openings in fiscal 2026.
- Accelerated Digital Transformation: The company's digitally enabled comparable sales surged 22.6% in Q2, driven by a 32% increase in e-commerce site traffic and a 45% spike in mobile app traffic, indicating that Costco is well-positioned to sustain digital sales growth over the next decade, enhancing overall performance.
- Improved Profitability: Costco's net income for Q2 rose 13.8% year-over-year, exceeding $2 billion, reflecting strong bottom-line growth; although the stock's valuation already incorporates years of flawless execution, it remains a wise hold for current investors.
See More
Costco's Resilience in Economic Downturns
- Stable Membership Revenue: Costco's membership revenue surpassed $5 billion in fiscal 2025, with a global renewal rate of around 90%, providing a stable income base that helps maintain profitability during economic downturns.
- Price Advantage Attracts Consumers: During recessions, consumers tend to favor retailers with lower prices, and Costco's markup rate of only 12.5% significantly enhances its market appeal compared to traditional retailers.
- Efficient Operating Model: With a limited assortment of about 4,000 products, Costco can purchase goods at lower costs and maintain high inventory turnover, allowing it to remain competitive even in challenging economic conditions.
- Market Volatility Risks: Despite Costco's strong performance during downturns, its stock may still be subject to volatility, particularly in times of economic uncertainty, which investors need to be aware of.
See More
Three Consumer Staples Stocks Resilient to AI Disruption
- Coca-Cola's Stability: Coca-Cola (KO) serves an astonishing 2.2 billion servings daily, leveraging its strong brand influence and pricing power to attract investors, with the board having raised dividends for 64 consecutive years, showcasing resilience in the AI era.
- Costco's Market Position: Costco (COST) achieved $68 billion in net sales in the latest fiscal quarter, boasting 82 million membership households; despite competition from online shopping, it maintains steady revenue and net income growth, indicating that its unique shopping experience will continue to draw consumers.
- Procter & Gamble's Brand Strength: Procter & Gamble (PG) generated $22 billion in total revenue in Q2 2026, supported by its well-known brands like Head & Shoulders and Crest, demonstrating strong market leadership, with a remarkable 135-year history of dividend payments underscoring its profitability stability.
- Investment Outlook for Staples: While companies like Coca-Cola, Costco, and Procter & Gamble exhibit resilience against AI disruptions, their future investment returns are not expected to be extraordinary, prompting investors to carefully assess potential gains.
See More
Coca-Cola and Two Consumer Staples Stocks Resilient Against AI Disruption
- Coca-Cola's Brand Power: With an astonishing 2.2 billion servings consumed daily, Coca-Cola's strong brand influence and pricing power ensure stability amidst AI advancements, allowing investors to continue receiving reliable income.
- Costco's Market Position: In Q2 2026, Costco achieved $68 billion in net sales with 82 million membership households, demonstrating that despite e-commerce competition, consumers still favor the in-person shopping experience, reflected in its steady revenue and net income growth.
- Procter & Gamble's Longevity: Founded in 1837, Procter & Gamble generated $22 billion in revenue in Q2 2026, showcasing strong profitability through its well-known brands, and maintaining a remarkable 135-year streak of dividend payments, highlighting its long-term market competitiveness.
- Adaptability to Technological Progress: Despite the rapid advancements in AI potentially disrupting many industries, companies like Coca-Cola, Costco, and Procter & Gamble are well-positioned to navigate these changes effectively, maintaining their market positions due to stable business models and consumer loyalty.
See More
Shift in Corporate Investments in DEI and ESG Initiatives
- Investment Trends: According to Just Capital's annual rankings, companies continue to increase investments in areas such as workers, communities, and the environment despite political and legal pressures, indicating a focus on long-term benefits.
- Employee Benefits Enhancement: Hewlett Packard stands out for its employee benefits, offering flexible time-off policies and 12 weeks of paid leave, aimed at improving employee economic well-being and job satisfaction.
- Minimum Wage Increase: The average minimum wage in the Russell 1000 has risen from $16.92 to $17.27, with more companies publicly disclosing their minimum wage, reflecting a growing emphasis on employee economic conditions.
- Decline in Transparency: While companies are ramping up investments in workforce initiatives, there has been a decline in disclosures related to diversity and climate issues, highlighting the complex balance companies face between external pressures and internal goals.
See More
Reasons Behind Costco's High Valuation
- Strong Comparable Sales: Costco's comparable store sales increased by 7.4% year-over-year in fiscal Q2, with a 6.7% growth after excluding gasoline and foreign exchange impacts, demonstrating the company's core value proposition continues to resonate with consumers and solidifying its market position.
- International Expansion Potential: With 924 warehouses globally as of Q2, mostly in North America, Costco's 'Other International' segment saw a 13% increase in comparable sales, indicating significant future expansion potential in underpenetrated markets in Europe and Asia.
- Digital Sales Surge: The company's digitally enabled comparable sales surged 22.6% in fiscal Q2, with e-commerce site traffic up 32% and mobile app traffic up 45%, showcasing successful digital transformation efforts that are expected to drive future sales growth.
- Robust Net Income Growth: Costco's net income for fiscal Q2 surged 13.8% year-over-year to over $2 billion, reflecting strong profitability alongside robust sales growth, although the high valuation warrants cautious consideration.
See More
Costco's Steady Growth and Expansion Potential
- Strong Sales Growth: Costco's comparable store sales increased by 7.4% year-over-year in fiscal Q2 2023, with a 6.7% growth after excluding gasoline prices and foreign exchange impacts, demonstrating the company's core value proposition resonates with consumers, thereby enhancing its competitive position in the retail market.
- International Expansion Potential: As of the second quarter, Costco operates 924 warehouses globally, predominantly in North America, while its 'Other International' segment saw a 13% increase in comparable sales, highlighting significant expansion potential in underpenetrated markets in Europe and Asia, with plans for 28 new warehouse openings in fiscal 2026.
- Accelerated Digital Transformation: The company's digitally enabled comparable sales surged 22.6% in Q2, driven by a 32% increase in e-commerce site traffic and a 45% spike in mobile app traffic, indicating that Costco is well-positioned to sustain digital sales growth over the next decade, enhancing overall performance.
- Improved Profitability: Costco's net income for Q2 rose 13.8% year-over-year, exceeding $2 billion, reflecting strong bottom-line growth; although the stock's valuation already incorporates years of flawless execution, it remains a wise hold for current investors.
See More
Costco's Resilience in Economic Downturns
- Stable Membership Revenue: Costco's membership revenue surpassed $5 billion in fiscal 2025, with a global renewal rate of around 90%, providing a stable income base that helps maintain profitability during economic downturns.
- Price Advantage Attracts Consumers: During recessions, consumers tend to favor retailers with lower prices, and Costco's markup rate of only 12.5% significantly enhances its market appeal compared to traditional retailers.
- Efficient Operating Model: With a limited assortment of about 4,000 products, Costco can purchase goods at lower costs and maintain high inventory turnover, allowing it to remain competitive even in challenging economic conditions.
- Market Volatility Risks: Despite Costco's strong performance during downturns, its stock may still be subject to volatility, particularly in times of economic uncertainty, which investors need to be aware of.
See More
Three Consumer Staples Stocks Resilient to AI Disruption
- Coca-Cola's Stability: Coca-Cola (KO) serves an astonishing 2.2 billion servings daily, leveraging its strong brand influence and pricing power to attract investors, with the board having raised dividends for 64 consecutive years, showcasing resilience in the AI era.
- Costco's Market Position: Costco (COST) achieved $68 billion in net sales in the latest fiscal quarter, boasting 82 million membership households; despite competition from online shopping, it maintains steady revenue and net income growth, indicating that its unique shopping experience will continue to draw consumers.
- Procter & Gamble's Brand Strength: Procter & Gamble (PG) generated $22 billion in total revenue in Q2 2026, supported by its well-known brands like Head & Shoulders and Crest, demonstrating strong market leadership, with a remarkable 135-year history of dividend payments underscoring its profitability stability.
- Investment Outlook for Staples: While companies like Coca-Cola, Costco, and Procter & Gamble exhibit resilience against AI disruptions, their future investment returns are not expected to be extraordinary, prompting investors to carefully assess potential gains.
See More
Coca-Cola and Two Consumer Staples Stocks Resilient Against AI Disruption
- Coca-Cola's Brand Power: With an astonishing 2.2 billion servings consumed daily, Coca-Cola's strong brand influence and pricing power ensure stability amidst AI advancements, allowing investors to continue receiving reliable income.
- Costco's Market Position: In Q2 2026, Costco achieved $68 billion in net sales with 82 million membership households, demonstrating that despite e-commerce competition, consumers still favor the in-person shopping experience, reflected in its steady revenue and net income growth.
- Procter & Gamble's Longevity: Founded in 1837, Procter & Gamble generated $22 billion in revenue in Q2 2026, showcasing strong profitability through its well-known brands, and maintaining a remarkable 135-year streak of dividend payments, highlighting its long-term market competitiveness.
- Adaptability to Technological Progress: Despite the rapid advancements in AI potentially disrupting many industries, companies like Coca-Cola, Costco, and Procter & Gamble are well-positioned to navigate these changes effectively, maintaining their market positions due to stable business models and consumer loyalty.
See More
Shift in Corporate Investments in DEI and ESG Initiatives
- Investment Trends: According to Just Capital's annual rankings, companies continue to increase investments in areas such as workers, communities, and the environment despite political and legal pressures, indicating a focus on long-term benefits.
- Employee Benefits Enhancement: Hewlett Packard stands out for its employee benefits, offering flexible time-off policies and 12 weeks of paid leave, aimed at improving employee economic well-being and job satisfaction.
- Minimum Wage Increase: The average minimum wage in the Russell 1000 has risen from $16.92 to $17.27, with more companies publicly disclosing their minimum wage, reflecting a growing emphasis on employee economic conditions.
- Decline in Transparency: While companies are ramping up investments in workforce initiatives, there has been a decline in disclosures related to diversity and climate issues, highlighting the complex balance companies face between external pressures and internal goals.
See More
