COST Stock In Focus: Analysts Flag Membership Growth Concerns Post Q4 Report

D.A. Davidson raised its Costco price target to $1,040 from $1,000, while Wells Fargo cut its target to $950 from $1,000.

• Roth Capital maintained a $781 price target and 'Sell' rating, highlighting slower new-member additions despite improved renewal rates.
• Bernstein, JPMorgan and Mizuho also adjusted their targets, with their notes focusing on membership-fee growth, long-term store expansion and comparable-sales momentum.
• Costco’s net sales increased 11.2% year-over-year to $93.9 billion, while total revenue, including membership fees, reached $95.72 billion. 

Costco Wholesale (COST) stock was in focus Friday after multiple analysts updated their views following the company's fiscal fourth-quarter results. 

COST shares traded nearly 2% higher at the time of writing.

Analysts Reassess Costco After Q4

DA Davidson raised its price target on Costco to $1,040 from $1,000 while maintaining a 'Neutral' rating, according to The Fly. The firm called the fourth quarter another solid earnings report and highlighted Costco's 9.4% total comparable sales growth, including 6.7% excluding the impact of gasoline prices and foreign exchange.

Wells Fargo, meanwhile, lowered its price target to $950 from $1,000 while maintaining an 'Equal Weight' rating. The firm said tariff refunds and stronger fuel margins more than explained the fourth quarter (Q4) beat, while also pointing to gross-margin strength and moderating membership growth.

Membership Growth In Focus

Roth Capital analyst Bill Kirk maintained a 'Sell' rating and $781 price target on Costco, according to The Fly. Kirk noted that worldwide renewal rates improved to 89.8%, while U.S. and Canada renewal rates reached 92.3%.

However, the analyst said year-over-year growth in new member additions slowed to another post-COVID low. Roth also pointed to a deceleration in traffic growth on a two-year basis and argued that Costco's valuation remains difficult to justify given the moderation in membership growth.

Bernstein also identified membership-fee income growth as a key question over the next 12 months, citing the relatively saturated U.S. market and Costco's lack of near-term plans for store openings in Asia. The firm maintained an 'Outperform' rating despite lowering its price target to $1,143 from $1,144.

JPMorgan lowered its price target to $1,015 from $1,100 while maintaining an 'Overweight' rating. The firm said total membership growth is a concern for some investors but argued that Costco remains a consistent share gainer with a visible long-term store-expansion opportunity, according to The Fly.

Mizuho also lowered its target to $1,065 from $1,100 while maintaining an 'Outperform' rating, citing solid comparable sales and slower but still respectable membership growth.

Costco's Q4 Results Highlights

Costco reported its fiscal fourth-quarter results on Thursday, with net income rising to $2.998 billion from $2.610 billion a year earlier. The result came in above the $6.52-per-share analyst estimate and included a $0.15-per-share benefit from IEEPA tariff refunds, after the company reinvested part of the proceeds into member value.

Net sales increased 11.2% year-over-year to $93.9 billion, while total revenue, including membership fees, reached $95.72 billion. Comparable sales climbed 9.4%, or 6.7% when excluding gasoline price and foreign exchange effects.

Costco ended the quarter with 84.1 million paid members, up 3.8% from a year earlier. Executive memberships increased 9.4% to 42.3 million, while the renewal rate in the U.S. and Canada was 92.3%. Members under 40 represented more than one-quarter of the company's membership base.

Retail View On COST

On Stocktwits, retail sentiment toward COST shifted to ‘Extremely Bullish’ from ‘Bullish’, with message volume remaining ‘High’ over the past 24 hours. COST was also among the platform’s trending tickers at the time of writing.

COST shares have gained more than 2% year-to-date.

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