Costco Wholesale Corporation COST just hit a fresh 52-week high, rewarding investors with impressive gains. But with the stock soaring, a key question arises — should you cash in now or stay invested? Costco’s strong fundamentals, including strong membership growth and pricing power, have fueled its rise, but is there still room to run? Let’s dive into the key factors driving this rally and whether it’s time to take profits.

The stock reached a new 52-week peak of $1,009.61 yesterday, a significant milestone that has caught investors’ attention. Closing at $1,005.83 on Monday, shares of Costco have shown a remarkable run on the bourses, surging 41.4% over the past year. The stock has outpaced the industry and the broader S&P 500 index, which have risen 21.8% and 23.8%, respectively, in the said period.

With its market dominance and resilient business model, Costco has long been a favorite among investors seeking stable growth.

COST Stock Past-Year Performance

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Costco Trading Above 50 & 200-Day Moving Averages

Technical indicators support Costco’s strong performance. The stock currently trades above its 50-day and 200-day moving averages, signaling robust upward momentum and price stability. This technical strength reflects positive market sentiment and growing confidence in COST’s prospects.
 

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Costco's Membership Base & Pricing Power: Key Drivers

Costco’s membership-based business model ensures a steady revenue stream. The retailer's ability to grow its membership base is a key factor behind its continued success. Costco has seen impressive membership renewal rates, often exceeding 90% in the United States and Canada. The renewal rates are a testament to Costco’s ability to retain its customers, driven by a combination of competitive pricing and quality products. 

The company's ability to offer high-quality products at low prices has allowed it to capture market share. Moreover, Costco’s private-label brand, Kirkland Signature, has been a major driver of consumer loyalty and repeat business. As a result, Costco has consistently registered comparable sales growth. The metric rose 7.4% in December. This follows consecutive increases of 3.1% and 5.1% in November and October, respectively.

Costco’s cost-efficient operations are a significant contributor to its profitability. The company’s ability to maintain low operating costs while delivering high-quality goods allows it to operate on thin margins but on greater volume. Moreover, Costco's expansion into international markets is expected to fuel its growth. During the first quarter of fiscal 2025, COST opened six net new warehouses, of which four were outside the United States.

While Costco is traditionally known for its brick-and-mortar stores, it has successfully leveraged e-commerce to capture the growing trend of online shopping. Total e-commerce comparable sales grew 13% during the first quarter. This growth was largely driven by Costco Logistics, the company’s platform that specializes in large, bulky items such as appliances and furniture. Costco Logistics made nearly 1 million deliveries in the first quarter. The company’s U.S. app was downloaded 2.9 million times in the quarter, bringing total downloads to approximately 42 million. Costco Next, a curated online marketplace for exclusive products, achieved record sales during Thanksgiving and Cyber Monday.

How Do Estimates Measure Up for COST?

Reflecting the positive sentiment around Costco, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Over the past 30 days, the consensus estimate for the current and next fiscal years has increased by 5 cents and 1 cent to $18.01 and $19.66 per share, indicating year-over-year growth rates of 11.8% and 9.2%, respectively.

See the Zacks Earnings Calendar to stay ahead of market-making news.
 

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Valuation Analysis: Is Costco’s Premium Price Justified?

Costco’s stock is trading at a significant premium to its industry peers, such as Dollar General Corporation DG, Target Corporation TGT and Ross Stores ROST. Costco's forward 12-month price-to-earnings ratio stands at 53.73, higher than the industry’s ratio of 33.94 and the S&P 500's ratio of 22.46.
 

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Now, the question arises: Is Costco’s current price warranted or overvalued in today’s market?

Costco’s premium valuation reflects investor confidence in the company’s ability to deliver consistent growth and maintain its competitive advantage. While the stock’s current price may seem high, its robust business model, strong customer base and reliable revenue streams justify the premium.

Should You Buy, Hold or Sell COST?

Costco’s impressive run to a 52-week high reflects its strong fundamentals, resilient business model and unwavering consumer loyalty. While the stock trades at a premium, its steady membership growth, pricing power and expanding e-commerce presence justify investor confidence. Given its market dominance and continued operational strength, Costco remains well-positioned for long-term growth. Costco currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Target Corporation (TGT) : Free Stock Analysis Report

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