Costco Shares Face Scrutiny Amid Valuation Concerns

As the new year begins, Costco Wholesale Corporation finds its equity under pressure, navigating a distinct technical downtrend while investors closely examine its premium valuation. Trading near $854, the stock has declined approximately 7% over the past year. This analysis explores whether this pullback is warranted by examining technical indicators, key financial metrics, insider and institutional activity, and the implications of an upcoming sales report.

Despite the share price weakness, Costco's underlying business metrics demonstrate resilience. For the first quarter of fiscal 2026, the company reported revenue of $65.98 billion, an increase of 8.2% year-over-year. Earnings per share (EPS) came in at $4.50, compared to $4.04 in the prior-year period. Net income for the twelve weeks ended November 23, 2025, reached $2.001 billion.

Membership fees, boosted by a September 2025 price increase, rose 14% to $1.329 billion. Comparable sales growth remained positive at 6.4% overall, with e-commerce sales surging 20.5%. The warehouse club operator continues to expand its footprint, operating 923 locations with 35 new openings planned for FY2026. Paid household memberships grew 5.2% to 81.4 million, although the global renewal rate saw a slight dip to 89.7%. These figures paint a picture of a fundamentally healthy, growing enterprise, which stands in contrast to recent stock performance.

Valuation and Technical Pressure

The market's primary concern centers on valuation. Even after recent declines, the stock's price-to-earnings (P/E) ratio remains elevated, cited in a range of approximately 45.8 to 48. This is down from peaks near 60 but continues to challenge investors seeking to justify such a premium.

From a chart perspective, the shares are trading significantly below key moving averages. The 50-day simple moving average sits at $894.79, with the 200-day SMA at $934.90. This positioning confirms a pronounced downward trend and suggests persistent selling pressure.

Should investors sell immediately? Or is it worth buying Costco?

Divergent Signals from Major Investors

Activity among key stakeholders reveals a mixed outlook. Over the last 90 days, company insiders sold 8,946 shares worth roughly $8.18 million. Notable sellers included Executive Vice Presidents Javier Polit and Claudine Adamo.

Institutional investors, meanwhile, are sending conflicting signals. Synergy Asset Management dramatically increased its stake by over 722%, building a position of 32,307 shares. Conversely, Jarislowsky Fraser reduced its holding by about 6%. This divergence highlights the ongoing debate among larger money managers, weighing the company's strong operational fundamentals against the risks posed by its rich valuation.

Upcoming Catalyst: The December Sales Report

All eyes are now on the December sales report scheduled for release on January 7th. This update is expected to serve as a critical near-term catalyst. Market experts anticipate a significant deceleration in comparable sales growth to around 2.2%, a sharp drop from the 7.4% recorded in December 2024. Core merchandise sales, excluding fuel and foreign exchange effects, are projected to increase by only about 2.0%. Digital sales growth is also forecast to slow dramatically to approximately 5.0%, compared to 34.4% in the year-ago period.

Confirmation of this slowdown would likely intensify the existing valuation pressure on the stock in the short term. However, should the reported figures substantially exceed these subdued expectations, concerns over the premium multiple could be temporarily alleviated.

In summary, Costco's operational foundation remains robust, supported by a loyal membership base and ongoing efficiency gains. Yet, the combination of a high valuation and an anticipated slowdown in sales growth justifies a cautious stance at current price levels. The upcoming sales data will be pivotal in determining the stock's next directional move.