Costco's (COST +1.18%) stock has rallied nearly 180% over the past five years. The world's largest warehouse club retailer repeatedly impressed investors with robust sales and membership growth, high renewal rates, and new store openings. However, Costco's stock still trades below Wall Street's average price target of $1,062 and its top price target of $1,205. Let's see what it might take for Costco's stock to rise more than 20% and top $1,200.
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Costco's business is thriving
From fiscal 2020 to fiscal 2025 (which ended last August), Costco's number of warehouses rose from 795 to 914, its total cardholders grew from 105.5 million to 140.6 million, and its global renewal rate expanded from 88% to 90.5%. Its adjusted net sales (excluding fuel sales and foreign exchange) consistently grew in the mid-single to low-double digits.
Costco achieved that growth even as inflation, rising interest rates, geopolitical conflicts, and other macro headwinds rattled the retail sector. It also continued to gain new members even after it raised its membership fees for the first time in seven years in late 2024.
NASDAQ: COST
Key Data Points
But keep an eye on its renewal rates
In the first quarter of fiscal 2026, Costco's adjusted net sales rose 6.4%, its number of warehouses increased to 923, its number of cardholders climbed to 145.9 million, but its global renewal rate dipped to 89.7%. It also warned that its renewal rates could dip slightly "over the next few quarters" due to lower renewal rates among digitally signed members.
Costco is offsetting that pressure by gaining more cardholders, charging higher fees, and opening more stores, but its stock could remain stagnant -- as it did over the past year -- until its renewal rates start rising again. Costco's stock also isn't cheap at 49 times this year's earnings.
How long will it take Costco's stock to hit $1,200?
From fiscal 2025 to fiscal 2028, analysts expect Costco's revenue and EPS to grow at CAGRs of 8% and 11%, respectively. Those growth rates are steady, but they might not support its premium valuation. If Costco matches those estimates but trades at a more reasonable 25 times forward earnings by the final year, its stock would actually decline nearly 40% to $617. But if it still trades at 49 times forward earnings, its stock would rise more than 20% to $1,209.
I believe Costco's upside is limited at these frothy levels, and its stock could either trade sideways or decline slightly over the next two years as it tries to stabilize its renewal rates. It should eventually reach $1,200 -- but that probably won't happen by the end of fiscal 2028.
