Costco Wholesale (COST -0.89%) has been one of those stalwart stocks you can rely on to beat the market for decades. It has handily outperformed the S&P 500 over most time periods as its business flourishes under almost any kinds of circumstances.
However, it's having a rare market underperformance right now, roughly flat year to date while the market is up 14%. It's trading at $916 per share as of this writing, and it doesn't look like it will break through the $1,000 mark in 2025. However, it's likely to get there in 2026.
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Why the market is usually up on Costco
The market typically prizes Costco's distinct and superior retail model. The company charges annual membership fees for customers, allowing them to partake of its rock-bottom prices on merchandise ranging from carrots to karats (as in gold bars.) This works out in high savings for its members, and it also generates higher volume and sales, since paying members want to make the most of their memberships.
Membership fees go to the bottom line, and Costco can get by with razor-thin markups by keeping costs low in its bare-bones warehouses and getting the best deals from suppliers because of its purchase volume. This works in any kind of economy, but it could be even more attractive when there's economic pressure, since customers naturally try to get the best deals when they're penny pinching.
The proof is in the pudding (and $1.50 hot dogs). In the 2025 fiscal fourth quarter (ended Aug. 31), sales increased 8% year over year. Comparable sales (comps) were up 5.7%, and e-commerce sales were up 13.6%. Earnings per share rose from $5.29 to $5.87, and membership fees were up 14%.
The membership metrics were also excellent. There were 81 million members, up 6.3% from last year, and 38.7 million executive members, outpacing standard member growth at 9.3%.
Executive members pay double the standard membership annually, or $130, and they're highly engaged. They now represent 47.7% of total paid members but account for 74.2% of sales. As for renewals, in the U.S. and Canada they were 92.3%, while globally they came in at 89.8%.
Why the market is down on Costco
As fantastic as those results were, including beating Wall Street's expectations on the top and bottom lines, the market spotted some weaknesses. Comps growth has been slowing down, and global renewals were lower than usual. Management attributed that to an increase in online signups, which have now entered the renewal pool and renew at slightly lower rates. Management isn't troubled by that, as it sees a net advantage in having more online signups because it's attracting younger members who will drive future growth.
Go with Wall Street on this stock
Of 30 analysts covering the stock, 60% are bullish on Costco while 40% say hold. The median stock price target is $1,083, or 18% higher than today's price over the next 12 to 18 months, while the high is $1,218, or 33% higher than today's price.
Costco stock trades at a P/E ratio of 50, which is a premium valuation, and that's why there's room for the stock to deflate on any miss or any negative sentiment. However, there's a reason it carries a premium valuation. It's reliable for sales and earnings growth whether there's inflation or not, and it continues to attract new customers and high renewals. The model is too good to dismiss.
Under current conditions, it doesn't look likely that Costco is going to break through $1,000 before the end of this year. Although it's one of few public companies that provides a monthly sales update, it won't report the next quarterly results until December, and it would have to be unusually stellar to bump the stock up another 10%.
However, as interest rates go lower and Costco reports higher earnings, bringing down the P/E ratio and showcasing its strength, Costco stock is likely to hit and surpass $1,000 sometime next year.
