Is Costco Stock Still a Buy After a 38% Gain in the Past Year?

Company Performance - Costco's stock surged 37 6% over the past year, outperforming the industry (21 8%) and the S&P 500 (25%) [4] - Comparable sales growth was 7 4% in December, following increases of 3 1% and 5 1% in November and October, respectively [2] - Membership fee income grew 7 8% year over year in Q1 fiscal 2025, with paid household memberships up 7 6% and Executive Memberships increasing 9 2% [18] Business Model & Operations - Costco's private-label brand, Kirkland Signature, drives consumer loyalty and repeat business [2] - The company operates on thin margins but high volume due to cost-efficient operations [3] - Membership-based model ensures steady revenue, with renewal rates exceeding 90% in the US and Canada [18] Growth & Expansion - Costco opened six net new warehouses in Q1 fiscal 2025, four of which were outside the US [3] - E-commerce comparable sales grew 13% in Q1, driven by Costco Logistics, which made nearly 1 million deliveries [16] - The US app was downloaded 2 9 million times in Q1, bringing total downloads to approximately 42 million [6][16] Financials & Valuation - Costco's forward 12-month P/E ratio is 49 87, higher than the industry (30 33) and the S&P 500 (22 13) [8] - Zacks Consensus Estimate for EPS increased by 14 and 26 cents for the current and next fiscal years, respectively, indicating expected YoY growth rates of 11 7% and 9 4% [11] Challenges & Risks - SG&A expenses rose 9 1% YoY in the last reported quarter due to higher employee wages and expansion costs [7] - Intense competition from Walmart, BJ's Wholesale Club, and Amazon, which are investing in e-commerce and customer experience [13] - Inflationary pressures are causing consumers to be more judicious with disposable income, affecting merchandise categories [19] Market Sentiment & Investor Considerations - Costco's stock is trading below its 50-day moving average, indicating short-term weakness [20] - Positive estimate revisions highlight strong fundamentals, but high valuation and recent volatility may prompt some investors to book profits [15]