Costco stock prices are down even though the business is booming — should you invest now?
With its membership being highly coveted among consumers and its return policy being famously generous, Costco has done a great job with its revenue. But that does not necessarily translate into a strong position on the stock market. Investors are waiting for the company’s earnings report, which is set to come out on December 11, after Walmart released its earnings a few days back. Those interested will be keeping a keen eye on Costco Wholesale Club Inc. (NASDAQ: COST) to see if it is the right time to buy.
As per a report in MarketBeat, COST shares are down 10% over the last three months. This has nullified the company’s year-to-date (YTD) gains and put the stock near crucial technical levels. Many have already bought COST stocks, and for good reason. Costco is a company that hardly ever sees bad days thanks to its massive and loyal customer base both inside the US and internationally. Revenue has also seen growth recently.
Comp sales in Q3 slowed down to 13.6% but rebounded with 26.1% in September and then with 16.6% in October. That’s not all. In its fiscal year Q4 2025 report, which came out in September, the company reported earnings per share (EPS) of $5.87 and record revenue of a whopping $86 billion. Both of these figures are a lot better than what investors might have predicted beforehand. Costco has a habit of exceeding expectations from time to time.
It also reported a 5.7% comp sales number, which was a big hit among investors, along with 8.6% comps from international stores. A big reason for these figures is customer loyalty. Costco makes a big chunk of its revenue from memberships, and it is imperative for customers to keep renewing them each year. In 2024, the company raised the price of its Gold Star membership by $5 and Executive membership by $10.
Despite that, Costco reported 89.8% global renewal rates in its Q4 earnings, which included a 92.4% retention rate in the US and Canada. Membership income even grew by a substantial 14%, which was more than double the figure the year prior. Despite these positives, there are some factors that one needs to be wary of before investing in Costco stocks. Valuation is at excessive levels, seeing the stock trade at 49 times forward earnings and 14 times the book value.
Another factor is that Costco sells its merchandise with slim margins in order to cover for lost revenue through membership sales. The operating margin is razor-thin at just 4%, which leaves little room for error. Any kind of disruption could have an immediate effect on the company’s bottom line. With rising inflation and President Donald Trump’s unpredictable tariffs, the possibility of that happening is high.
A high valuation can be a boon or a bane, depending on the situation. At the moment, Costco's stock is trading at 50 times its earnings, which means that the retailer needs to pump out incredible revenue figures. However, if customers cut down on purchases due to rising costs, things might not look good for 2026.
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