Costco makes moves amid shaky economy

Costco Wholesale keeps proving its critics wrong.

While tariff fears, rising gas prices, and a shaky global economy have rattled many retailers, the warehouse giant keeps delivering. 

Its latest earnings report and monthly sales update paint a picture of a company gaining ground. 

And Wall Street is paying attention.

According to data from 24 analysts, the average 12-month price target for Costco stock is $1,103.66, representing a 16% gain from current levels. 

The high-end target is $1,315, while the most cautious estimate is $781. Of those 24 analysts, 16 rate the stock a "buy", seven say "hold", and only one says "sell".

That kind of consensus is rare. So what is Costco (COST) doing right?

Costco reports steady growth in fiscal Q3

Let's start with the numbers from the company's third-quarter fiscal 2026 earnings call, which covered the 12 weeks ending May 10.

In fiscal Q3, Costco reported net income of $2.19 billion, or $4.93 per share, an increase of 15% from $1.90 billion, or $4.28 per share, in the same period a year earlier.

• Net sales came in at $69.15 billion, an 11.6% jump from $61.96 billion in Q3 of 2025. 
• Comparable sales, which strip out new store openings, rose 9.8%. 
• Adjusted for gas price inflation and foreign exchange, the number was 6.6%. 
• Digitally enabled comparable sales surged 21.5%.
• Traffic, meaning how often members showed up, rose 2.4% worldwide.
• Membership fee income grew 10.7% year-over-year to $1.37 billion. The company ended the quarter with 82.9 million paid members, up 4.1% from last year.

Related: Costco makes an even bigger bet on its house brand

Costco Chief Financial Officer Gary Millerchip called out membership upgrades as a key bright spot.

Executive Memberships, which carry higher spending and stronger renewal rates, grew 9.6% year-over-year to 41.2 million.

"Members who are executive level generally spend more with us and visit more frequently," Millerchip emphasized on the earnings call.

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The bull case for Costco stock

If the Q3 numbers were strong, May made them look even better.

• Net sales for the four weeks ending May 31 came in at $24.01 billion, up 14.5% from $20.97 billion in the same period a year earlier. 
• U.S. comparable sales rose 13.7%. Canada was up 9.2%. International markets climbed 9.7%. Total company comparable sales grew 12.5%.
• Stripping out the benefits of gas price inflation and foreign exchange, the total comp still came in at 8%, while digital sales rose 21.1%.
• Foot traffic for the month was up 3.9% worldwide and 3.7% in the U.S. That's a meaningful step up from the 2.4% reported just weeks earlier in Q3.

"Gas was up high 40s, driven by price per gallon changes year-over-year as well as an acceleration in volume growth," Andrew Yoon, Costco's director of finance and investor relations, said on the sales call.

During the Q3 call, Costco President and CEO Ron Vachris pointed to price cuts on items like Kirkland Signature Crispy Wings, from $16.99 to $14.99, and KS King Size Sheets, from $89.99 to $79.99.

"Our goal is to be the first to lower prices and the last to raise them," Vachris said on the earnings call.

That strategy is resonating with members under pressure. Gas prices surged, and Costco responded by widening its price gap relative to competitors. 

More Costco:

• As consumers struggle, Costco sets a troubling record
• Costco makes an even bigger bet on its house brand
• Costco just lowered prices on key items

The result: record-breaking gas volumes throughout the quarter. The final five weeks of Q3 ranked as the top five volume weeks in company history. 

The company is also leaning into what is working: pharmacy, digital, artificial intelligence-enhanced product pages, and same-day delivery now averaging under 45 minutes in the U.S.

New warehouse openings, currently on track for 26 net-new locations in fiscal 2026, will continue to expand Costco's footprint.

Costco is not immune to macro uncertainty. 

Tariffs, Middle East supply disruptions, and rising healthcare costs are all on its radar. But the company's playbook, which is to keep prices low, keep members loyal, and keep improving the experience, is holding up.

Is Costco stock undervalued?

Valued at a market cap of $422 billion, Costco stock has returned over 600% to shareholders in the past decade, after adjusting for dividends. 

Analysts tracking the big-box retailer forecast adjusted earnings to expand from $18.21 per share in fiscal 2025 to $28.87 per share in fiscal 2030. 

Costco stock is priced at 43.5x forward earnings, which is higher than its 10-year average of 36.6x. 

Costco trades at a premium, given it is projected to expand earnings by less than 10% annually through 2030. 

I expect Costco to underperform the broader markets due to its steep valuation. However, Wall Street thinks otherwise and remains bullish.

Related: Costco invests in Kirkland brand, shares special dividend news