2025 is turning out to be an ugly year so far for Amazon (AMZN 2.61%). Shares of the e-commerce and cloud services giant have fallen more than 20% year to date as the major market indexes sank. Amazon has even paused moving forward with some new data center leases, according to Wells Fargo analysts. Less than a month ago, CEO Andy Jassy said that he didn't envision the company slowing its plans to build new data centers.
Meanwhile, Costco Wholesale (COST +1.58%) hasn't been impacted much at all by the stock market turbulence. Shares of the discount warehouse store operator are up around 7% year to date, nearly as large of a gain as the stock delivered during the first four months of 2024.
In short, Costco is off to a solid start this year while Amazon is floundering. But is Amazon a better stock to buy right now than Costco? The answer might surprise you.
NASDAQ: AMZN
Key Data Points
Where Costco has a clear advantage
There's a simple reason why Costco is outperforming Amazon in 2025. Its business is less impacted by economic headwinds. The Trump administration's tariffs have caused many investors to worry about higher inflation and a slowing economy.
Granted, Costco isn't immune to the impact of tariffs. CEO Ron Vachris noted in the company's fiscal 2025 second-quarter earnings call in March 2025 that roughly one-third of Costco's sales in the U.S. are for products imported from other countries. However, he added that less than half of those products are imported from China, Canada, and Mexico, which have the highest tariffs levied by the Trump administration.
Vachris said that Costco is prepared to "minimize the impact" of any tariff-related cost increases on its members. He also emphasized, "In uncertain times, our members have historically placed even greater importance on the value of high-quality items at great prices."
Investors recognize the resilience Costco has demonstrated in the past during economic downturns. As a result, the stock is widely viewed as a safe haven during periods of high market volatility and economic uncertainty.
NASDAQ: COST
Key Data Points
Where Amazon beats Costco
While Costco is likely to outperform Amazon during economic declines, Amazon beats Costco in an area that matters more to long-term investors. I'm referring to growth.
Amazon's sales jumped 10% year over year in its most recent quarter, while Costco's sales rose 9.1%. That might seem as if the two companies are nearly equal when it comes to delivering growth, but there's more to the story.
First, Amazon's earnings nearly doubled year over year in Q1 to $20 billion. Costco's net income increased by a paltry 2.6%. Wall Street predicts that Amazon's earnings will soar 19.6% next year. Analysts expect Costco's earnings will increase by roughly 10.7%.
Can Amazon grow its bottom line more than Costco over the long run? I think so. For one thing, Amazon has more levers to pull to continue increasing its profitability than Costco. More importantly, Amazon has more optionality, or paths to growth, than Costco.
Artificial intelligence (AI) should present a much greater tailwind for Amazon than it will for Costco. Amazon has expanded into healthcare. It owns Zoox, a self-driving car company that should have major growth potential if the robotaxi market takes off. Amazon plans to soon launch its Project Kuiper satellites that will provide high-speed internet across the world.
The perhaps surprising clincher
I think Amazon's growth prospects outweigh Costco's safe haven appeal. If you're an investor who's focused on the long term, I suspect you'll agree.
However, there's a clincher as to why Amazon is the better stock to buy right now that might be surprising. Amazon has historically been the kind of stock for which you could almost throw conventional valuation metrics out the window. It looked ridiculously expensive, but kept on rising. Now, though, Amazon looks cheap compared to Costco.
Amazon's forward price-to-earnings ratio is 26.2. That might seem high until you look at Costco's forward earnings multiple of 54.4. I think Amazon's growth prospects justify its higher multiple, but Costco's don't.
Costco could continue to deliver stronger gains than Amazon for a while. But my money (both figuratively and literally) is on Amazon to be the bigger winner over the next decade and beyond.
