Growth Expected vs High Valuation- Costco (COST.US) Q4 earnings beat expectations but Wall Street remains divided.

Although Costco (COST.US) announced better-than-expected fourth quarter results at the end of last month, Wall Street analysts have differing views on the stock. Bullish analysts believe that there is still room for further price increases, while cautious analysts continue to emphasize its high valuation levels. Evercore ISI analyst Greg Melich has given Costco a "outperform" rating with a target price of $1025, which corresponds to a 46 times price-to-earnings ratio for the 2027 fiscal year earnings per share (EPS) of $23.25 (approximately 2.2 times the S&P 500 index valuation). The analyst stated, "We believe that Costco's extension of operating hours for 'Executive Members' is expected to continue to bring about a growth of approximately 100 basis points in foot traffic. Additionally, the company's half-price sale of popular GLP-1 weight-loss drugs Ozempic and Wegovy (priced at $499 for members, with an additional 2% discount for Executive Members) should help to drive foot traffic and member growth." "With the rise in commodity prices across the U.S. due to tariffs, we believe that Costco's ultimate value positioning will help it maintain or further expand market share by 2026, even as membership renewal rates dip slightly." Oppenheimer analyst Rupesh Parikh also gave Costco an "outperform" rating. The analyst said, "Costco continues to show broad-based growth momentum in all major categories. We still believe in Costco's ability to continue expanding market share and outperforming peers in the current environment." "As non-food categories face challenging year-over-year comp numbers, we recommend investors to take advantage of potential volatility in trading opportunities. This sales report further strengthens our confidence in the company's ability to handle difficult comparative base challenges." UBS Group AG analyst Michael Lasser has given Costco a "buy" rating. The analyst said, "It is worth noting that we believe Costco's market share accelerated in September, while the overall retail industry may experience a slowdown during the same period. This will become more evident as the third quarter earnings season progresses. Many positives, including this factor, should continue to support Costco's premium valuation." In contrast, analyst Louis Liu has a more cautious attitude towards Costco, giving the stock a "hold" rating. The analyst said, "As Warren Buffett said, 'It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.' However, applying this to Costco, I still believe that this outstanding company is currently overvalued. Eventually, valuation tendencies will manifest, and market frenzy cannot last forever." He added, "Based on this, existing Costco shareholders may consider selling covered call options to hedge potential downside risks while continuing to retain exposure to long-term compounding growth."