Costco (COST) Stock Forecast & Price Target

Costco Wholesale's business model, characterized by a membership-based warehouse club offering high-quality goods at low prices, has resulted in strong financial metrics, including a 93% member renewal rate in the US and Canada. The company has also demonstrated robust growth, with digitally-enabled comparable sales increasing by 16.6% and total traffic rising by 3.6%, reflecting consumer demand for value-driven purchases. Furthermore, about 55% of fiscal 2025 revenue stems from grocery offerings, indicating a solid revenue base supported by the essential nature of these products, alongside expected momentum in non-food categories.

Costco Wholesale faces significant headwinds that contribute to a negative outlook, particularly stemming from macroeconomic pressures, including deteriorating consumer confidence, rising fuel costs, and unfavorable foreign exchange rate fluctuations, all of which may hinder its ability to pass through higher product costs. The company's projected performance is further challenged by cannibalization effects from new store openings and adverse impacts from previous natural disasters, which have complicated year-over-year comparisons and contributed to negative comp sales in recent quarters. Additionally, while Costco's shares have recently re-rated lower, resulting in a relative P/E consistent with historical averages, the overall volatility in commodity costs and potential increases in interest rates may impede future growth and profitability.