The retailer is sure to have a much larger customer base in a few years.
Costco Wholesale (COST -0.93%) is a popular stock on Wall Street for good reasons. The warehouse club retailing giant has outperformed the market by consistently gaining share in a highly competitive industry. Costco's growth rate rarely disappoints, and its earnings are much more stable than its peers thanks to a steady stream of subscription fee income.
Those competitive assets have been enough to allow the stock to roughly triple the wider market's gains over the last several years. Costco's stock price has nearly doubled in the past three years, in fact, while the S&P 500 is up 25% in that time.
But can the company sustain that momentum going forward? Let's take a closer look.
Costco's business will grow
Costco's surest path to positive shareholder returns is to boost sales at a faster clip than its peers. It's been doing a great job on this score lately, with same-store sales rising 6% in the most recent quarter, compared to Walmart's 4% uptick.
Both retailers lean on their price-leadership selling approach to boost customer traffic. However, Costco has some additional advantages over its larger rival that should support higher investor returns. Its mix of consumer essentials and luxury discretionary items allows it to cater to a wide range of shoppers, for one.
Costco has shown that it can be nimble, too. Its recent offering of precious metals like gold and silver helped the e-commerce niche expand at a blazing 18% rate last quarter. Look for Costco to press those advantages over the next few years, ideally keeping same-store sales gains near the top of its industry.
Membership metrics
One underappreciated fact driving stock returns is that Costco is a membership club first and a retailer second. Most of its earnings come from subscriber fees that aren't nearly as volatile as the profits that come from merchandise sales.
That's why it matters where Costco's membership metrics shift over the next several years. Costco recently achieved a record 93% renewal rate, meaning that essentially all its subscribers are getting plenty of value from their memberships. If the company can maintain that high level of renewals over the next few years, the stock will likely keep beating the market. That's especially true given the fact that Costco will almost certainly hike its annual fees in 2024 or 2025. Higher fees, combined with a rising membership base, bode well for the retailer's earnings power.
Watch Costco's stock for now
The stock's returns still might disappoint investors even if Costco makes progress on these key growth and profit initiatives. After all, shares are currently valued near an all-time high of 1.3 times annual sales. You can own Walmart and Target for roughly half that premium.
As a result, investors might want to watch Costco stock for the time being in hopes that a market downturn produces a more compelling price for its shares. Sure, you'll have a hard time finding a retailer that offers a better mix of growth, stability, and earnings. But Costco's elevated stock price limits the returns you might get from owning this stellar business over the next few years.
Consider retailing peers that aren't priced at such a high premium, like Target, and keep an eye on Costco stock for the next opportunity to pick up shares at a discount.
Demitri Kalogeropoulos has positions in Costco Wholesale. The Motley Fool has positions in and recommends Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.
FAQs
Long-Term Costco Stock Price Predictions
| Year | Prediction | Change |
|---|
| 2025 | $ 878.62 | 18.59% |
| 2026 | $ 1,041.99 | 40.65% |
| 2027 | $ 1,235.74 | 66.80% |
| 2028 | $ 1,465.52 | 97.81% |
2 more rowsCostco is also cash rich. The company has generated cash flow growth of 14.1%, and is expected to report cash flow expansion of 10.4% in 2024. With solid fundamentals, a good Zacks Rank, and top-tier Growth and VGM Style Scores, COST should be on investors' short lists.
What is the stock projection for Costco in 2030? ›
According to the latest long-term forecast, Costco price will hit $800 by the end of 2024 and then $900 by the middle of 2025. Costco will rise to $1000 within the year of 2026, $1200 in 2027, $1400 in 2028, $1500 in 2029, $1600 in 2030, $1700 in 2031, $1800 in 2032 and $2000 in 2034.
Will Costco stock reach $1 000? ›
But I believe that Costco's P/E ratio could actually contract because of how expensive it is right now, and this creates downside risk for investors. Don't expect the $1,000 mark to be met in 2024. And for investors who are drawn to the business, it's best to practice patience and wait for a better valuation.
What is the stock price prediction for Costco in 5 years? ›
Costco Wholesale Corp quote is equal to 743.840 USD at 2024-05-04. Based on our forecasts, a long-term increase is expected, the "COST" stock price prognosis for 2029-04-25 is 1137.401 USD. With a 5-year investment, the revenue is expected to be around +52.91%. Your current $100 investment may be up to $152.91 in 2029.
What is the Kirkland stock price forecast for 2025? ›
As far as the long-term Kirklands stock forecast is concerned, here's what our predictions are currently suggesting (these predictions are based on the 10-year average growth of KIRK): Kirklands stock prediction for 1 year from now: $ 8.42 (342.92%) Kirklands stock forecast for 2025: $ 3.68 (93.44%)
What are analysts saying about Costco stock? ›
The highest analyst price target is $870.00 ,the lowest forecast is $650.00. The average price target represents 8.88% Increase from the current price of $722.22. Costco's analyst rating consensus is a Strong Buy. This is based on the ratings of 25 Wall Streets Analysts.
What's the best stock to buy and hold forever? ›
3 Rock-Solid Stock Picks to Buy and Hold Forever
- JPMorgan Chase (JPM)
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Of course, Costco is going to have a much larger number of stores in the future. In the last 10 years, the store count expanded at a compound annual rate of 3%. Management opened 23 net new locations in fiscal 2023, with plans to open 31 in the current fiscal year.
What is the highest Costco stock has ever been? ›
Historical daily share price chart and data for Costco since 1986 adjusted for splits and dividends. The latest closing stock price for Costco as of May 03, 2024 is 743.90. The all-time high Costco stock closing price was 784.33 on March 07, 2024.
Costco shares are priced at 1.3 times revenue, or about twice the valuation of peers Target and Walmart. Its premium is sitting near an all-time high currently while these competitors are far off of their record levels. That means there's a higher risk that you'll overpay for this highly successful business.
Is Costco over or undervalued? ›
Key Points. Stock valuations can be subjective, but shares of Costco appear to be objectively overvalued. The retail giant has a great business model that has delighted both customers and shareholders. But BJ's Wholesale Club offers investors the same model -- and at a more reasonable valuation.
Should I keep Costco stock? ›
If you're seeking an industry leader with fantastic brand strength, steady earnings growth, and solid (if unpredictable) dividend income, then look no further than Costco stock. It's a great business that's trading at a decent price today.
Who is the biggest investor in Costco? ›
The top individual insider shareholders of Costco are Craig Jelinek, Charles Munger, and Patrick Callans, and the top institutional shareholders are Vanguard Group Inc., BlackRock Inc., and State Street Corp.
Will Costco stock continue to grow? ›
Still growing
According to Wall Street analysts' estimates, Costco's revenue is set to increase at a compound annual rate of 6.1% between fiscal 2023 and 2026. There's still some growth to be achieved. Profits have risen at an even faster clip due to the benefits of economies of scale.
Will Kirkland stock go up? ›
Average Price Target
Based on 1 Wall Street analysts offering 12 month price targets for Kirkland's in the last 3 months. The average price target is $2.50 with a high forecast of $2.50 and a low forecast of $2.50. The average price target represents a 28.21% change from the last price of $1.95.
