Costco (COST) Stock Forecast & Price Target

Costco Wholesale's membership-based retail model allows it to maintain a frugal cost structure, enabling the company to offer competitive pricing that drives high sales volume, evidenced by a 5.0% traffic increase in February 2025. The firm reported an expansion in retail gross margin to 10.9% in the second quarter of fiscal 2025, supporting strong profitability despite thin margins. Furthermore, with a membership renewal rate of 90.5% and an increase in membership fee income by 7.4% to $1.2 billion, Costco demonstrates strong customer loyalty and growth potential within its business model.

Costco Wholesale faces multiple financial challenges leading to a negative outlook on its stock, notably a projected core merchandise comparable sales growth of only 5.5% for FY25, due to significant pressures from gas prices and foreign exchange fluctuations. Additionally, a reduced earnings per share estimate of $18.12, down from $18.20, highlights the company's struggle with rising competition, potential share losses to e-commerce retailers, and an uncertain macroeconomic environment characterized by lower consumer spending and increasing interest rates. Furthermore, significant foreign exchange impacts are expected to affect overall company performance, with estimates indicating a 240 basis point decline in total impact, alongside even greater declines in international markets, ultimately signaling vulnerability in Costco's financial stability.