Market Performance - S&P 500 increased by 0.3% while Nasdaq decreased by 0.2% this week[1] - Small-cap stocks led the decline with Russell 2000 value down by 1.0% and Russell 2000 growth down by 3.1%[1] - 13 sectors saw gains, while 10 sectors experienced losses, with telecommunications leading at +9.0%[1] Fund Flows - Estimated fund flow for S&P 500 components was -$84.1 million this week, down from +$5.6 million last week[2] - Major inflows were seen in technology hardware (+$40.3 million) and media & entertainment (+$39.5 million)[2] - Significant outflows occurred in software & services (-$106.0 million) and healthcare equipment & services (-$57.7 million)[2] Earnings Forecast - S&P 500's forward 12-month EPS expectation increased by 0.8% this week, up from 0.2% last week[3] - 21 sectors had upward revisions, with technology hardware & equipment seeing the largest increase at +5.6%[3] - Energy sector saw a downward revision of -2.7%[3] Risks - Economic fundamentals, international political situations, U.S. fiscal policies, and Federal Reserve monetary policies present uncertainties[3]

Core Insights - Costco and Walmart are the two largest retailers globally, with Walmart operating big box and grocery stores, while Costco focuses solely on club stores [1] - Both companies are currently considered expensive, with price-to-sales, price-to-earnings, and price-to-book ratios above their five-year averages and the market's average [1] Valuation and Investment Appeal - Value investors are likely to avoid both stocks due to their high valuation metrics, with Walmart's P/E ratio exceeding the market average [1] - Dividend investors may also be disinterested, as Walmart's dividend yield is 0.8% and Costco's is even lower at 0.5%, both below the S&P 500's yield of 1.1% [2] Growth Potential - Growth investors may find Costco more appealing due to its ongoing geographic expansion, despite Walmart's larger size [3] Company Performance Metrics - Costco's current price is $940.10, with a market cap of $417 billion, a gross margin of 12.88%, and a dividend yield of 0.68% [5] - Walmart's current price is $119.13, with a market cap of $950 billion, a gross margin of 23.90%, and a dividend yield of 0.79% [6][7] Business Model and Long-term Outlook - Costco's membership fees contribute significantly to its gross profits, allowing for lower product margins and higher member retention [5] - Walmart benefits from consumers trading down to its stores due to economic conditions, but this could change if the economy improves [7] - Both companies are well-managed, but their current valuations make them less attractive for many investors, with Costco's business model seen as better positioned for long-term success [8]

Core Insights - The market is showing renewed interest in Costco Wholesale, with the stock up 13% in January 2026 after a stagnant previous year [1] - Costco's membership model continues to attract customers, leading to high renewal rates and robust profitability [1] Financial Performance - In the first quarter of fiscal 2026, Costco reported an 8.2% year-over-year increase in sales, with comparable sales rising 6.4% [2] - Digitally enabled sales surged by 20.5%, and earnings per share increased from $4.04 to $4.50 [2] - Membership renewal rates were 92.2% in the U.S. and Canada, and 89.7% worldwide, with paid memberships growing by 5.2% to 81.4 million [2] Business Model Adaptation - The company is evolving its business model by introducing self-checkout options and online registration and renewals [3] - While traditional e-commerce does not align well with Costco's warehouse model, the company is expanding grocery delivery through a partnership with Instacart and enhancing curbside pickup services [3] Market Response - Costco's monthly updates are well-received, with December sales showing an 8.5% year-over-year increase and comparable sales up 7% [4] - The stock has a market capitalization of $417 billion, with a current price of $940.10 and a P/E ratio of 52, indicating a premium valuation [6] Investment Considerations - Despite its reliable growth, Costco's stock is considered expensive, with a P/E ratio above 60 last year, which led to a market correction [6] - Currently trading at 52 times trailing-12-month earnings, the stock may appear less attractive, but long-term investors might consider dollar-cost averaging to capitalize on future growth [7]

Core Insights - Costco is committed to maintaining low membership prices as a core offering and has made recent changes to enhance membership value [2][3] - The company reported a significant increase in membership fee income, indicating successful retention and growth of its member base [14][17] Membership Improvements - Recent enhancements to Costco's membership include extended opening hours for Executive Members, discounted Instacart membership, and a 5% cash back on gas purchases [3][7] - The basic annual Gold Star membership costs $65, while the Executive membership is $130, offering a 2% annual reward on qualifying purchases [6][17] Membership Growth Metrics - Membership fee income reached $1.329 billion, a 14% increase year-over-year, with 39.7 million paid Executive memberships, up 9.1% from the previous year [14][17] - Total paid members increased to 81.4 million, a 5.2% rise year-over-year, and total cardholders reached 145.9 million, up 5.1% [17]

Core Viewpoint - Costco is a leading player in the retail sector, showing significant investment returns over the past decade, outperforming the S&P 500 index [1][2]. Group 1: Investment Performance - Over the past 10 years, Costco has produced a total return of 682%, meaning a $100 investment would be worth $782 today [1]. - Costco's current market capitalization stands at $417 billion, with shares trading at a price of $940.10 [3][4]. Group 2: Business Fundamentals - The company has expanded its global presence with over 900 warehouses, leading to increased merchandise sales and a larger membership base [2]. - Costco is experiencing higher net income due to its growth in warehouse numbers and customer loyalty [2]. Group 3: Stock Valuation - Costco's shares are currently considered expensive, with a price-to-earnings ratio of 52, suggesting that investors should wait for a pullback before considering an investment [4].

Group 1 - Jim Cramer has highlighted Costco Wholesale Corporation (NASDAQ:COST) as one of his favorite stocks despite a 2.7% decline over the past year and an 11.5% increase year-to-date [2] - Wolfe Research indicated that Costco could benefit from $75 billion in tax refunds for households earning less than $200,000 in 2026 [2] - Mizuho raised Costco's share price target to $1,000 from $950 and upgraded the rating to Outperform, citing positive trends in premium member additions and domestic renewals [2] Group 2 - Cramer expressed dissatisfaction with Costco's recent share price performance, stating it needs to go higher as it has stalled at 47 times earnings [3] - There is a belief that some AI stocks may offer greater potential for higher returns compared to Costco, despite its investment potential [3]

Core Insights - Instacart and Costco have expanded their partnership into Europe, launching Costco's first same-day delivery websites in France and Spain, utilizing Instacart's Storefront Pro technology [1][3] - This expansion allows Costco members in these countries to shop online and receive same-day delivery from local Costco locations, enhancing convenience and access to products [2][3] Group 1: Expansion Details - Costco members in France and Spain can now place orders directly through Costco's websites, with deliveries fulfilled from local stores [2] - The initial rollout includes delivery from all Costco locations in France and Spain, covering major cities such as Paris, Mulhouse, Bilbao, Madrid, Seville, and Zaragoza [1] - Instacart's technology and fulfillment services are now being introduced in Europe for the first time, marking a significant step in its international expansion [1][4] Group 2: Technology and Services - Instacart's Storefront Pro is an enterprise-grade commerce platform that enables retailers like Costco to efficiently scale their online ordering and delivery programs [4] - The partnership aims to provide a seamless shopping experience for members, with same-as-in-store pricing and a flat service fee per order [2][3] - Instacart's technology supports hundreds of grocers' e-commerce sites in North America and is now extending its capabilities to European markets [4]

Core Viewpoint - Costco is facing a lawsuit for allegedly misleading customers by advertising its rotisserie chicken as containing "no preservatives," despite the presence of two preservatives in the product [1][2]. Group 1: Lawsuit Details - The lawsuit was filed in the Southern District and claims that Costco's labeling misleads "reasonable consumers" into believing that no preservatives were added to the chicken [1]. - The specific preservatives mentioned in the lawsuit are sodium phosphate and carrageenan, which are included in the ingredient list [1]. Group 2: Financial Implications - The lawsuit alleges that Costco has systematically cheated customers out of tens to hundreds of millions of dollars through false advertising regarding its Kirkland Signature Seasoned Rotisserie Chicken [2].

Core Viewpoint - Costco Wholesale has demonstrated significant growth, with shares increasing over 170% in the past five years, outperforming the S&P 500's 80% gains during the same period [1] Dividend Analysis - Costco's current dividend yield stands at 0.5%, which may not attract investors initially, but the company has a history of increasing dividends and paying special dividends, suggesting it could be an underrated income stock [2] - The dividend yield is lower due to the substantial rise in stock price; as the stock value increases, the yield decreases even if the dividend payment remains the same [2] - The quarterly dividend has doubled from $0.65 at the start of 2020 to $1.30, reflecting a compounded annual growth rate of 12.2% [3] - Costco has issued special dividends twice, paying $10 per share in 2020 and $15 per share in 2023, indicating a strong performance and willingness to reward shareholders [4] Investment Perspective - While Costco's dividend should not be the primary reason for investment, it is a valuable aspect that may be overlooked due to its low yield [6] - The stock is currently valued at over 50 times earnings, which may be challenging for some investors, but it could still be a good long-term investment due to growth potential and dividend benefits [7] - For long-term investors, Costco represents a solid stock to hold, benefiting from both growth and dividend payments over time [8]

Core Viewpoint - Costco is considered a solid investment in the retail sector, with a strong business model supported by membership fees and consistent growth in sales and stock performance [1][5]. Company Performance - Costco's stock has averaged annual gains of 23% over the past five years and 20% over the past 15 years [5]. - In the last reported quarter, Costco's sales grew by 8%, with e-commerce revenue increasing by over 20% [5]. - The company has a recent forward-looking price-to-earnings (P/E) ratio of 47, which is above its five-year average of 41, indicating that the stock may be overvalued at present [2]. Membership and Revenue - Costco generates more than $5 billion annually from membership fees, which significantly supports its business model [5]. - The company offers "executive" memberships with additional perks to encourage upgrades among its members [5]. Growth Potential - As of January, Costco operates 923 locations globally, with 633 in the U.S., indicating substantial room for growth [5]. - The company is well-regarded for treating its stakeholders favorably, providing above-average pay and benefits to workers, modest markups for shoppers, and substantial returns to shareholders, including special dividends [5].