Here's What Happened the Last Time Costco Stock Was This Expensive. Will History Repeat Itself?

Costco's Business Model and Market Presence - Costco operates nearly 900 member-only warehouses across multiple countries, including the US, Canada, Mexico, Australia, and several others [1] - The company attracts millions of customers with its low prices on a wide range of products [1] Valuation and Historical Context - Costco's stock currently trades at over 54 times earnings, a level not seen since April 1999 when its trailing 12-month P/E multiple hit 56.4 [2][3] - In 1999, after reaching this valuation, Costco's share price fell more than 20% within months and later plunged over 40% in 2000 [3] - The current forward earnings multiple of 50.8 and a PEG ratio of 5.5 indicate that the stock remains highly expensive [10] Market Comparisons and Potential Risks - The stock market in 2025 is again expensive, driven by enthusiasm for AI, similar to the dot-com bubble in 1999 [6] - Costco's high valuation is not limited to AI stocks, as it was also an exception in 1999 when many stocks had unjustified valuations [5][11] Growth Prospects and Earnings - Costco reported year-over-year earnings growth of 13% in its latest quarter, which may not be sufficient to justify its high P/E multiple [13] - Unless earnings accelerate significantly, the share price is likely to decline to a level more in line with realistic growth expectations [13][14] Investment Case for Costco - Despite its high valuation, some analysts believe Costco's shares can continue to rise due to its resilient business model and long-term growth opportunities [8][12] - Costco has earned its premium valuation through consistent market-share wins and a stable membership fee-based business model [12] - A potential pullback in the stock price could present an excellent buying opportunity for long-term investors [14]