Costco Shares Show Promise After Strong Quarterly Performance

Costco Wholesale Corporation has kicked off its 2026 fiscal year with a robust display of operational strength, delivering a quarterly report that surpassed Wall Street's forecasts. The key question for investors is whether these results can provide the necessary momentum to reverse the stock's recent underperformance.

For the first quarter of fiscal 2026, the membership-based retailer reported earnings per share of $4.50, comfortably beating the consensus estimate of $4.27. This represents an upside surprise of approximately 5.4%. Revenue came in at $67.31 billion, slightly above the anticipated $67.03 billion and marking an 8.3% increase compared to the same period last year.

The underlying sales metrics were particularly encouraging. Comparable sales, excluding the effects of fuel price fluctuations and foreign exchange, grew by a healthy 6.4%. A standout figure was the 20.5% surge in e-commerce revenue, highlighting the successful execution of the company's omnichannel strategy.

Market Sentiment and Analyst Outlook

In response to the earnings release, market analysts have revised their assessments upward. The consensus price target now implies a potential upside of well over 20% from the stock's current trading level. Experts cite the surprising resilience in discretionary spending categories and the accelerated online growth as primary reasons for their optimism. This digital acceleration is seen as a critical factor in maintaining Costco's competitiveness against pure-play online retailers.

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

Despite the positive report, near-term market sentiment remains mixed. The share price continues to trade significantly below its 52-week high, having lost ground over preceding months. While the latest quarterly figures serve as a positive catalyst, the market now expects a continuation of this strength, with particular focus on the crucial December holiday sales period.

Path Forward and Key Levels to Watch

The outlook for Costco remains constructive, contingent on the sustainability of its comparable sales growth and e-commerce momentum. Although company management has not issued specific annual guidance, the market has adjusted its trajectory for the business higher. The next significant milestone will be the release of Q2 FY2026 results in March.

From a technical perspective, two scenarios are in focus:
* A sustained move above the 50-day moving average (€788.79) would help rebuild technical confidence and improve the odds of a lasting trend reversal.
* Conversely, if the stock remains near its 52-week low, it is likely to stay under pressure and vulnerable to profit-taking.

In summary, Costco's latest quarterly performance reinforces the core investment thesis. However, the capacity to fuel a sustained recovery will depend squarely on the persistence of its e-commerce expansion and the upcoming holiday season results.