- Price
- $904.71
- Fair value
- $740.00
- Discount
- -22.3%
- Uncertainty
- Medium
- LSEG rating
- 2.10
- Moat
- Wide
- Next earnings
- 2026-09-24
- Next earnings is estimate
- No
- Company name
- Costco Wholesale
- Sector
- Membership warehouse retail
- About
- Costco runs membership-only warehouse stores: shoppers must pay an annual fee to buy there, either a $65 Gold Star membership or a $130 Executive membership that pays back up to 2% of qualifying purchases, capped at $1,250 a year. It operates roughly 900 warehouses worldwide, most of them in the US and Canada, with a smaller and growing footprint in Mexico, Japan, the UK, Korea, Australia, Taiwan, China, and other countries. Inside each warehouse, Costco stocks a limited assortment, often just one or two options per category, and buys in bulk to sell at low markups, betting that low prices keep members coming back and renewing every year. Membership fees are almost pure profit: they now cover roughly half of Costco's total operating income even though merchandise sales make up the vast majority of reported revenue. Costco also sells gasoline at many locations, and its warehouses often include pharmacies, optical centers, hearing-aid centers, and food courts. Kirkland Signature, its private label, spans food, household goods, electronics, and clothing. E-commerce is still a small share of total sales but is growing much faster than the warehouse business overall.
- Thesis
- Costco trades around $904.71, about 22% above the analysts' $740 fair value estimate. Unlike a typical pick on this list, Costco is not cheap relative to that estimate; the question is why investors keep paying a premium for it. The main reason is that Costco's membership model produces unusually predictable, recurring profit: 82.9 million paid households renew at rates near record highs, 92.2% in the US and Canada and 89.7% worldwide as of the most recently reported quarter, and membership fee income alone covers roughly half of operating profit, insulating results from swings in merchandise pricing. On top of that stable base, sales keep growing quickly: fiscal 2026 net sales rose 10.2% to $297.3 billion, and digitally-enabled comparable sales grew nearly 18% in August 2026 alone. The board also keeps returning cash to shareholders, raising the quarterly dividend to $1.47 per share in April 2026 and paying a $12-per-share special dividend in January 2026. That mix of low uncertainty and steady double-digit growth is why the stock trades near 48 times trailing earnings versus about 26 times for the S&P 500: investors are effectively paying for certainty. The fiscal fourth-quarter report, due after the market closes on September 24, 2026, is a near-term test of whether that growth and those renewal rates are holding up. The honest counter-case: at today's premium there is little room for a stumble. If comparable-sales growth cools once gasoline-price and calendar tailwinds fade, if tariff costs squeeze Costco's already thin merchandise margins, or if the market simply re-rates a mature, wide-moat retailer back toward a more ordinary multiple, the stock could fall a long way even if the underlying business keeps performing fine.
- Risks
- The stock trades about 22% above the analysts' fair value estimate and near 48 times trailing earnings, versus about 26 times for the S&P 500. This leaves little room for error: any slowdown in sales growth or renewal rates could trigger an outsized decline as the market re-rates the stock.
US tariff policy has kept shifting through 2026, including a temporary import surcharge that expired in July 2026 and newer duties that replaced it. Costco has said it is trying to absorb rather than fully pass on these costs, which pressures its already thin merchandise margins.
Membership fees now supply roughly half of Costco's operating income, even though they are a small fraction of reported revenue. A slowdown in membership growth, or weaker renewal rates after a future fee increase, would hit profit disproportionately compared with a dip in merchandise sales alone.
Recent comparable-sales growth has been boosted by gasoline price inflation (worldwide average fuel prices per gallon were up over 25% year over year in August 2026) and by calendar timing. If gas prices fall back, headline comparable-sales growth could look noticeably weaker even if underlying shopping volume stays healthy.
Warehouse retail is maturing in Costco's largest market, the US, and competitors including Walmart's Sam's Club and Amazon are investing to take share in bulk buying and membership retail. Continued execution by Costco's leadership, CEO Ron Vachris since January 2024 and CFO Gary Millerchip since March 2024, is needed to keep growing ahead of that competition.
As a grocery and general-merchandise retailer that sells heavily under its own Kirkland Signature brand, Costco is exposed to product recalls, food-safety incidents, and product-liability claims that could damage trust in that brand.
- Recent events
- 2026-09-02: Costco reported August 2026 sales and closed fiscal 2026: full fiscal year (52 weeks ended August 30, 2026) net sales were $297.3 billion, up 10.2%. Fourth-quarter (16 weeks) net sales were $93.9 billion, up 11.3%, and August net sales alone were $23.70 billion, up 9.9%, with digitally-enabled comparable sales up 17.9% for the month.
2026-05-28: Costco reported Q3 fiscal 2026 results: net sales of $69.15 billion, up 11.6%, and diluted earnings per share of $4.93, up from $4.28 a year earlier. Membership fee income was $1.37 billion, up 10.7%, with the US/Canada renewal rate at 92.2% and the worldwide rate at 89.7%.
2026-04-15: Costco's board raised the quarterly cash dividend from $1.30 to $1.47 per share ($5.88 annualized), the company's 22nd consecutive annual dividend increase, payable May 15, 2026.
2026-03-05: Costco reported Q2 fiscal 2026 results: net sales of $68.24 billion, up 9.1%, and diluted earnings per share of $4.58, up from $4.02. Membership fee income rose 13.6% to $1.35 billion, with 82.1 million paid members and an 89.7% worldwide renewal rate.
2026-01-16: Costco paid a special cash dividend of $12.00 per share, announced in December 2025, distributing about $5.3 billion to shareholders.
2025-12-11: Costco reported Q1 fiscal 2026 results: net sales of $65.98 billion, up 8.2%, and diluted earnings per share of $4.50, up from $4.04. Membership fee income rose 14% to $1.329 billion, and digitally-enabled comparable sales grew 20.5%.