Costco (COST) AI Stock Analysis

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Costco

(NASDAQ:COST)

Select Model

Outperform 75 (OpenAI - 4o)

Rating:75Outperform

Price Target:

$1,071.00

▲(16.93% Upside)

Costco's overall stock score reflects its strong financial performance and positive earnings call insights, which are slightly offset by high valuation concerns and mixed technical indicators. The company's robust revenue growth, strategic expansion, and solid cash flow position it well for future growth, despite valuation and technical challenges.

Positive Factors

Revenue Growth

Consistent revenue growth indicates Costco's strong market position and ability to attract and retain customers, supporting long-term business expansion.

Membership Model

The growth in membership fee income underscores the strength of Costco's membership model, providing a stable and recurring revenue stream that enhances financial stability.

E-commerce Expansion

Strong e-commerce growth reflects Costco's successful adaptation to digital retail trends, enhancing its competitive edge and market reach in the evolving retail landscape.

Negative Factors

Foreign Exchange Impact

Adverse foreign exchange impacts can erode profitability and complicate financial planning, posing a challenge to international operations and earnings stability.

Tariff Challenges

Tariff complexities can increase operational costs and disrupt supply chains, requiring strategic adjustments that may affect margins and operational efficiency.

SG&A Expense Increase

Rising SG&A expenses can pressure operating margins and reduce profitability, necessitating cost management strategies to maintain financial health.

Costco (COST) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$419.21B

Dividend Yield0.52%

Average Volume (3M)2.17M

Price to Earnings (P/E)53.6

Beta (1Y)0.62

Revenue Growth8.17%

EPS Growth9.92%

CountryUS

Employees333,000

SectorConsumer Defensive

Sector Strength42

IndustryDiscount Stores

Share Statistics

EPS (TTM)5.87

Shares Outstanding443,477,080

10 Day Avg. Volume2,343,206

30 Day Avg. Volume2,168,836

Financial Highlights & Ratios

PEG Ratio0.00

Price to Book (P/B)0.00

Price to Sales (P/S)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap1.13

Enterprise Value/Revenue1.76

Enterprise Value/Gross Profit13.74

Enterprise Value/Ebitda40.75

Forecast

1Y Price Target

$1,076.06

Price Target Upside17.48% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering23

Costco Business Overview & Revenue Model

Company DescriptionCostco Wholesale Corporation, together with its subsidiaries, engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China, and Taiwan. It offers branded and private-label products in a range of merchandise categories. The company offers sundries, dry groceries, candies, coolers, freezers, liquor, and tobacco and deli products; appliances, electronics, health and beauty aids, hardware, garden and patio products, sporting goods, tires, toys and seasonal products, office supplies, automotive care products, postages, tickets, apparel, small appliances, furniture, domestics, housewares, special order kiosks, and jewelry; and meat, produce, service deli, and bakery products. It also operates pharmacies, opticals, food courts, hearing-aid centers, and tire installation centers, as well as 636 gas stations; and offers business delivery, travel, same-day grocery, and various other services online in various countries. As of August 29, 2021, the company operated 815 membership warehouses, including 564 in the United States and Puerto Rico, 105 in Canada, 39 in Mexico, 30 in Japan, 29 in the United Kingdom, 16 in South Korea, 14 in Taiwan, 12 in Australia, 3 in Spain, 1 in Iceland, 1 in France, and 1 in China. It also operates e-commerce websites in the United States, Canada, the United Kingdom, Mexico, South Korea, Taiwan, Japan, and Australia. The company was formerly known as Costco Companies, Inc. and changed its name to Costco Wholesale Corporation in August 1999. Costco Wholesale Corporation was founded in 1976 and is based in Issaquah, Washington.

How the Company Makes MoneyCostco generates revenue primarily through its membership fees and the sale of goods. Members pay an annual fee to access the warehouse clubs, which provides a steady income stream. In addition, the company earns significant revenue from the sale of a wide range of products, including groceries, electronics, and household items, often at lower prices than traditional retailers due to its bulk purchasing and efficient operations. The company also benefits from ancillary revenue streams such as its pharmacy, optical, and travel services. Costco's strong focus on customer satisfaction and low prices fosters member loyalty, leading to a high renewal rate for memberships, which further contributes to its financial success.

Costco Key Performance Indicators (KPIs)

Any

Memberships

Memberships
Tracks the number of active memberships, highlighting customer loyalty and the potential for recurring revenue through membership fees.

Chart InsightsCostco's membership growth has been robust, with a steady increase over the past five years, reflecting strong customer loyalty and value perception. The latest earnings call highlights a 7.4% rise in membership fee income, underscoring the strategic importance of memberships to Costco's revenue model. With a 93% renewal rate in the US and Canada, and executive memberships contributing significantly to sales, Costco's expansion plans, including 28 new warehouses, are likely to further bolster membership growth despite challenges like foreign exchange and tariff uncertainties.

Data provided by:

Main Street Data

Costco Earnings Call Summary

Earnings Call Date:Sep 25, 2025

(Q3-2025)

% Change Since: |

Next Earnings Date:Dec 11, 2025

Earnings Call Sentiment Positive

The earnings call reflects a strong performance in terms of sales, net income growth, and strategic expansion efforts. However, challenges such as tariff impacts, foreign exchange losses, and increased operational costs were noted. Despite these challenges, the company's overall growth trajectory and strategic initiatives are positive.

Q3-2025 Updates

Positive Updates

Record Net Income Growth

Net income for the third quarter was $1.9 billion, or $4.28 per diluted share, up more than 13% from $1.68 billion or $3.78 per diluted share in the third quarter last year.

Significant Increase in Net Sales

Net sales for the third quarter were $61.96 billion, an increase of 8% from $57.39 billion in the third quarter last year.

Strong E-commerce Growth

E-commerce comparable sales were up 14.8% or 15.7% adjusted for FX.

Membership Fee Income Growth

Membership fee income was $1.24 billion, an increase of $117 million or 10.4% year over year, with a membership fee income growth of 11.4% excluding FX.

Expansion of Warehouse Locations

Opened nine new warehouses, including international locations, and planning to open 10 more in the next quarter.

Introduction of Buy Now, Pay Later Option

Launched a buy now, pay later offering through a partnership with Affirm, which has shown promising initial sales results.

Negative Updates

Impact of LIFO Charge

A $130 million LIFO charge negatively impacted the growth margin rate by 23 basis points.

Negative Impact from Foreign Exchange

Foreign exchange rates negatively impacted the translation of international net income to U.S. dollars by $35 million or $0.08 per diluted share.

Challenges with Tariffs

The evolving landscape with tariffs is adding complexity and challenges, impacting cost and necessitating strategic sourcing adjustments.

Decreases in Renewal Rates

Decreases in the renewal rates in Q3 versus Q2 were primarily attributable to sign-ups from a Groupon promotion entering the renewal rate calculation.

SG&A Rate Increase

Reported SG&A rate in the third quarter was higher year over year by 20 basis points, coming in at 9.16% compared to last year's 8.96%.

Company Guidance

During Costco Wholesale Corporation's third quarter 2025 conference call, the company provided significant guidance on its operational and financial performance metrics. Costco reported a net income of $1.9 billion, or $4.28 per diluted share, reflecting a 13% increase from the previous year. Net sales rose to $61.96 billion, up 8%, while U.S. comparable sales increased by 6.6%, or 7.9% when excluding gas deflation impacts. International comparable sales showed mixed results, with Canada up 2.9% but 7.8% adjusted for gas deflation and FX, and other international markets up 3.2% or 8.5% adjusted. E-commerce sales grew by 14.8%, or 15.7% adjusted for FX. The company opened nine new warehouses in the quarter and plans to open 27 for the fiscal year. Membership fee income increased by 10.4% to $1.24 billion, with renewal rates at 92.7% in the U.S. and Canada. Gross margin improved by 41 basis points year-over-year, with a reported rate of 11.25%, and SG&A expenses increased by 20 basis points to 9.16%. Costco's strategy includes expanding its global footprint, enhancing member value through price reductions and product sourcing adjustments, and investing in digital and technology improvements to boost the member experience.

Costco Financial Statement Overview

Summary

Costco's financial performance is robust, with strong revenue growth, stable gross profit margins, and improved net profit margins. The balance sheet reflects financial stability with a low debt-to-equity ratio and strong return on equity. Cash flow is solid, with consistent growth in operating cash flow and free cash flow, indicating strong cash generation and operational sustainability.

Income Statement

Very Positive

Costco has demonstrated strong revenue growth over the years, with a significant increase from $166.76B in 2020 to $268.78B in TTM 2025. Gross profit margin has remained stable, currently at 13.38% in TTM 2025, indicating operational efficiency. The net profit margin has shown a steady upward trend, reaching 2.92% in TTM 2025, reflecting improved profitability. EBIT and EBITDA margins have also improved, indicating effective cost management.

Balance Sheet

Very Positive

Costco maintains a healthy balance sheet with a strong equity position; the equity ratio is 35.94% in TTM 2025. The company has managed its debt well, maintaining a low debt-to-equity ratio of 0.30, which suggests financial stability. Return on equity is robust at 28.91% in TTM 2025, indicating effective use of equity to generate profit.

Cash Flow

Very Positive

Costco's cash flow from operations has shown consistent growth, and free cash flow has improved significantly, with a 10.4% increase from 2024 to TTM 2025. The operating cash flow to net income ratio of 1.58 in TTM 2025 indicates strong cash generation relative to net income, supporting operational sustainability.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	268.78B	275.24B	254.45B	242.29B	226.95B	195.93B
Gross Profit	34.34B	35.35B	32.09B	29.70B	27.57B	25.25B
EBITDA	11.58B	13.40B	12.15B	11.14B	10.28B	8.92B
Net Income	7.84B	8.10B	7.37B	6.29B	5.84B	5.01B
Balance Sheet
Total Assets	75.48B	77.10B	69.83B	68.99B	64.17B	59.27B
Cash, Cash Equivalents and Short-Term Investments	14.85B	15.28B	11.14B	15.23B	11.05B	12.18B
Total Debt	8.18B	8.17B	8.27B	8.88B	9.04B	10.13B
Total Liabilities	48.36B	47.94B	46.21B	43.94B	43.52B	41.19B
Stockholders Equity	27.13B	29.16B	23.62B	25.06B	20.64B	17.56B
Cash Flow
Free Cash Flow	7.32B	7.84B	6.63B	6.75B	3.50B	5.37B
Operating Cash Flow	12.43B	13.34B	11.34B	11.07B	7.39B	8.96B
Investing Cash Flow	-5.05B	-5.31B	-4.41B	-4.97B	-3.92B	-3.54B
Financing Cash Flow	-4.00B	-3.77B	-10.76B	-2.61B	-4.28B	-6.49B

Costco Technical Analysis

Technical Analysis Sentiment

Negative

Last Price915.95

Price Trends

50DMA

955.59

Negative

100DMA

977.61

Negative

200DMA

973.44

Negative

Market Momentum

MACD

-6.88

Positive

RSI

32.75

Neutral

STOCH

26.01

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For COST, the sentiment is Negative. The current price of 915.95 is below the 20-day moving average (MA) of 953.05, below the 50-day MA of 955.59, and below the 200-day MA of 973.44, indicating a bearish trend. The MACD of -6.88 indicates Positive momentum. The RSI at 32.75 is Neutral, neither overbought nor oversold. The STOCH value of 26.01 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for COST.

Costco Risk Analysis

Costco disclosed 26 risk factors in its most recent earnings report. Costco reported the most risks in the "Macro & Political" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Costco Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
COST	75 Outperform	$419.21B	53.62	30.69%	0.52%	8.17%	9.92%
WMT	75 Outperform	822.48B	38.88	23.69%	0.88%	4.23%	38.05%
TGT	72 Outperform	39.92B	10.16	25.47%	5.12%	-1.55%	-11.41%
DG	68 Neutral	22.48B	19.03	14.87%	2.31%	4.98%	-15.98%
BJ	66 Neutral	12.27B	21.38	27.58%	―	2.48%	9.41%
DLTR	53 Neutral	19.39B	-7.00	-82.21%	―	-29.67%	-178.03%
Sector *	62 Neutral	$20.33B	14.63	-3.31%	3.23%	1.93%	-12.26%

* Consumer Defensive Sector Average

Performance Comparison

COST

Costco

915.95

34.85

3.96%

Dollar General

102.12

17.07

20.07%

DLTR

Dollar Tree

95.06

21.94

30.01%

TGT

Target

87.85

-61.57

-41.21%

WMT

Walmart

103.16

24.15

30.57%

Bj's Wholesale Club Holdings

93.84

11.82

14.41%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Sep 19, 2025