Costco Wholesale (NASDAQ:COST) Stock Price Down 1.5% - Here's Why

Key Points

• Costco delivered strong fourth-quarter results: Revenue rose 11.1% year over year to $95.72 billion, while EPS of $6.75 exceeded the $6.54 consensus estimate. Comparable sales increased 9.4%, supported by higher traffic, larger basket sizes and broad strength across digital, fresh food, gas and other categories.
• Membership remains a key business strength: Membership-fee revenue grew about 11% to $5.907 billion, with record executive-member penetration and strong renewal rates. Warehouse expansion, international growth and e-commerce provide additional avenues for sales growth.
• Valuation is weighing on the stock: Shares fell 1.5% to about $910 despite the earnings beat, as Costco trades at a high earnings multiple and several analysts lowered price targets. Analysts remain broadly positive, with a “Moderate Buy” consensus and average target of $1,046.27, but investors are watching membership growth and margin pressure.

Costco Wholesale Corporation (NASDAQ:COST - Get Free Report) traded down 1.5% during trading on Wednesday. The company traded as low as $910.30 and last traded at $910.34. 2,206,697 shares traded hands during trading, an increase of 0% from the average session volume of 2,202,307 shares. The stock had previously closed at $924.59.

Key Stories Impacting Costco Wholesale

Here are the key news stories impacting Costco Wholesale this week:

• Positive Sentiment: Strong fourth-quarter results: Costco reported revenue of approximately $95.72 billion, up 11.1% year over year, and earnings of $6.75 per share, exceeding consensus estimates of $6.54. The company also delivered its fifth consecutive earnings beat. Should You Buy, Hold or Sell Costco Stock After Its Q4 Earnings Beat?
• Positive Sentiment: Broad-based sales momentum: Fourth-quarter comparable sales rose 9.4%, with U.S. comparable sales up 10.7%, supported by higher traffic and larger basket sizes. Fresh food, gas, pharmacy, travel and digital sales were key contributors. Costco's Sales Momentum Builds as Q4 Traffic and Ticket Rise
• Positive Sentiment: Membership economics remain a major strength: Membership-fee revenue increased about 11% to $5.907 billion, while executive membership penetration reached a record. High renewal rates and recurring fee income continue to support Costco’s resilient business model. Costco Earnings Call Highlights Growth, Global Expansion
• Positive Sentiment: Expansion and digital growth: Management highlighted warehouse expansion, international growth and continued e-commerce gains as avenues for extending sales momentum. COST Q3 Deep Dive: Warehouse Expansion, Membership Trends, and Digital Engagement Shape Outlook
• Neutral Sentiment: Potential stock split speculation: Costco’s high share price and strong fundamentals have made it a possible stock-split candidate, but a split would not change the company’s underlying value or earnings.
• Negative Sentiment: Valuation and analyst caution: Costco trades at a very high earnings multiple, while at least eight research firms lowered price targets after the earnings beat. Daiwa also reduced its target to $950 and maintained a Neutral rating, suggesting limited upside at current valuation levels. Analysts Cut Costco Price Targets After a Q4 Beat
• Negative Sentiment: Membership-growth concerns: Although renewal rates and fee income are strong, investors are watching whether Costco can continue attracting members and justify its valuation as warehouse expansion and member rewards pressure margins. Costco shoppers are changing in a way the retailer cannot ignore

Wall Street Analyst Weigh In

COST has been the subject of a number of analyst reports. Oppenheimer reissued an "outperform" rating and issued a $1,160.00 price objective on shares of Costco Wholesale in a research note on Wednesday, September 16th. Freedom Broker decreased their price target on Costco Wholesale from $1,030.00 to $1,010.00 and set a "buy" rating on the stock in a report on Friday, September 25th. TD Cowen reaffirmed a "buy" rating on shares of Costco Wholesale in a research note on Friday, September 25th. Deutsche Bank Aktiengesellschaft cut their target price on Costco Wholesale from $1,091.00 to $1,079.00 and set a "buy" rating for the company in a research report on Monday. Finally, DA Davidson lifted their target price on Costco Wholesale from $1,000.00 to $1,040.00 and gave the company a "neutral" rating in a research note on Friday, September 25th. Twenty-two equities research analysts have rated the stock with a Buy rating, ten have assigned a Hold rating and one has assigned a Sell rating to the company's stock. According to data from MarketBeat.com, the company presently has an average rating of "Moderate Buy" and an average target price of $1,046.27.

Costco Wholesale Stock Down 1.5%

The company has a 50 day simple moving average of $933.61 and a two-hundred day simple moving average of $966.60. The company has a market capitalization of $403.72 billion, a P/E ratio of 43.85, a PEG ratio of 3.95 and a beta of 0.86. The company has a quick ratio of 0.62, a current ratio of 1.06 and a debt-to-equity ratio of 0.11.

Costco Wholesale (NASDAQ:COST - Get Free Report) last issued its quarterly earnings results on Thursday, September 24th. The retailer reported $6.75 EPS for the quarter, beating the consensus estimate of $6.54 by $0.21. Costco Wholesale had a net margin of 3.04% and a return on equity of 27.60%. The company had revenue of $95.72 billion for the quarter, compared to the consensus estimate of $94.97 billion. During the same period in the prior year, the firm posted $5.87 EPS. The firm's revenue was up 11.1% compared to the same quarter last year. As a group, equities analysts predict that Costco Wholesale Corporation will post 22.8 EPS for the current year.

Costco Wholesale Dividend Announcement

The business also recently announced a quarterly dividend, which was paid on Friday, August 7th. Stockholders of record on Friday, July 24th were paid a dividend of $1.47 per share. This represents a $5.88 dividend on an annualized basis and a dividend yield of 0.6%. The ex-dividend date of this dividend was Friday, July 24th. Costco Wholesale's payout ratio is currently 28.32%.

Institutional Trading of Costco Wholesale

Institutional investors and hedge funds have recently modified their holdings of the stock. State Street Corp grew its position in shares of Costco Wholesale by 31.7% during the 2nd quarter. State Street Corp now owns 23,901,594 shares of the retailer's stock worth $22,359,224,000 after buying an additional 5,749,362 shares in the last quarter. Bank of America Corp DE lifted its position in shares of Costco Wholesale by 11.5% in the 1st quarter. Bank of America Corp DE now owns 7,515,031 shares of the retailer's stock worth $7,488,203,000 after purchasing an additional 773,651 shares during the period. Diamant Asset Management Inc. boosted its stake in shares of Costco Wholesale by 99,278.0% during the first quarter. Diamant Asset Management Inc. now owns 6,726,899 shares of the retailer's stock valued at $672,690,000 after purchasing an additional 6,720,130 shares in the last quarter. Corient Private Wealth LLC increased its holdings in Costco Wholesale by 838.9% during the fourth quarter. Corient Private Wealth LLC now owns 6,125,405 shares of the retailer's stock valued at $5,282,182,000 after buying an additional 5,472,968 shares during the period. Finally, Invesco Ltd. raised its stake in Costco Wholesale by 3.4% in the fourth quarter. Invesco Ltd. now owns 4,328,729 shares of the retailer's stock worth $3,732,836,000 after buying an additional 143,150 shares in the last quarter. Institutional investors own 68.48% of the company's stock.

About Costco Wholesale

Costco Wholesale Corporation operates a membership-based warehouse retail business under the Costco name. The company sells a broad selection of merchandise, including groceries, fresh foods, beverages, appliances, electronics, furniture, apparel, jewelry, hardware, and seasonal products. It also offers services such as gasoline, pharmacies, optical departments, hearing-aid centers, food courts, travel services, and business delivery in selected markets.

Costco markets many products under its private-label Kirkland Signature brand and sells merchandise through warehouse locations and e-commerce platforms.

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