Costco at a Crossroads: Is the Next Move Higher or Lower?

Key Points

• Costco Wholesale Club has dipped following new all-time highs earlier this year.
• The company continues posting impressive sales and membership growth, but cracks are beginning to show in the chart and valuation.
• Investors should closely monitor the factors discussed here before deciding on COST.

It’s been a rocky few weeks for the market’s favorite bulk retailer.

Don’t worry, the $1.50 hot dog and soda combo is safe, but Costco Wholesale Club NASDAQ: COST shares may have to walk a tightrope over the next few weeks.

Bullish and bearish signals are converging on the stock, and a conflicting investment picture is beginning to emerge.

Costco is at a crossroads, and today we’ll examine three bullish and bearish factors that are pulling the stock in different directions.

3 Bullish Signs That Long-Term Uptrend Is Intact

Let’s start with the good news: the long-term trend doesn’t appear to be breaking down. Costco continues to report strong sales, membership retention, and manageable debt levels. Here are three signals indicating that the bull is alive and well.

Robust Earnings and Margin Protection

Costco released fiscal Q3 2025 earnings on May 29 and (as usual) reported an EPS and revenue beat. The $63.21 billion revenue figure represents an 8% year-over-year (YOY) increase, and net income rose 13% YOY during the same period.

The income growth was particularly impressive considering Costco incurred a one-time $130 million accounting charge during the quarter, and also paid out $40 million in employee vacation pay adjustments. 

The company has also leveraged its supplier relationships to maintain its margins; the Q3 report showed a 41-basis-point YOY expansion in gross margins to 11.25%.

Strong Membership Growth and Retainment

It might not be Hotel California, but Costco members almost never leave. The company reported a 90.2% global renewal rate in Q3 2025, including nearly 93% renewals in the U.S. and Canada.

 Additionally, 73% of membership sales now come from the premium Executive card, which helped drive quarterly membership income growth up more than 10%.

The total number of paid Costco members worldwide sits at a record 79.6 million, up 6.8% YOY.

Sturdy Financial Footing

Absorbing a $130 million accounting charge without impacting earnings or margins highlights the strength of Costco’s balance sheet. Few thin-margin retailers manage debt like Costco can: the company’s debt-to-equity ratio is 0.21, and the quick ratio is 1.02.

The stock even pays a small dividend now, and it expanded its cash flow from operating activities to $11.34 billion in 2024, up from $11.07 billion in 2023 and $7.39 billion in 2022.

3 Bearish Signs Indicating Volatility Ahead

While the long-term trend is steady, the short-term one is murky. Bearish signals have emerged in both the fundamental and technical views of the stock, and investors should closely monitor the following factors moving forward.

High Valuation Compared to Industry Peers

Investors are willing to pay up for growth, and Costco’s 90% membership retention definitely points to a cult-like following. However, it’s becoming increasingly difficult to overlook some of Costco’s valuation metrics in comparison to the rest of the retail sector. COST currently trades at a Price-to-Earnings (P/E) ratio of 56.82, well above the market average of 23.70 and the retail sector average of 28.34.

Future projections aren’t rosy either, with the stock trading at 55 times forward earnings and 18 times book value. Earnings are expected to grow 9% over the next 12 months; however, this may be insufficient to justify an investment at this valuation.

Technical Indicators Signaling Momentum Loss

A steep valuation combined with messy technicals is often a recipe for volatility, and Costco’s stock is starting to look like it needs a breather. While the major indices crept up toward all-time highs to start the week (including a new all-time high close from the Nasdaq-100), COST’s reclamation bid was promptly rejected by the market.

The price failed to break through the 50-day moving average on the daily chart and ended the day in the red despite the new NASDAQ high. Falling momentum on the MACD confirms the weakness, and the 50-day MA could become a new resistance level over the next few sessions.

Macro Headwinds Slowing E-Commerce Growth

Perhaps investors got a little ahead of themselves in expecting Costco’s outrageous growth story to continue. E-commerce growth has slowed dramatically from 40% YOY to just 15% in Q3 2025. The company has navigated tariff uncertainty well, but anxious consumers and a reversal of COVID-era trends could limit the growth of its e-commerce division.

A further slowdown in consumer confidence could also leak into warehouse comp sales in the second half of 2025. 

Short-Term COST Volatility Could Offer Better Entry Points in The Weeks Ahead

If you’re a long-term investor in COST, you likely have little reason to worry about this current dip.

The stock’s valuation is hefty, but the growth in both merchandise and membership sales is undeniable.

Additionally, the company has demonstrated an ability to manage its margins amid economic uncertainty.

But the charts are flashing the caution flag, and a new short-term resistance level may reside at the 50-day moving average.

If you’re looking to open a new position in COST shares, it may be advisable to wait until the 50-day is functioning as support again, rather than resistance.