Should You Buy, Hold or Sell Costco Stock After Q3 Earnings?

Core Insights - Costco Wholesale Corporation reported strong third-quarter fiscal 2025 results, leading to discussions among investors regarding the stock's future direction [2] - The company's strategic initiatives and operational efficiencies have contributed to a positive market response, with shares rising 4.6% post-earnings release [3] Financial Performance - Costco's top and bottom lines exceeded the Zacks Consensus Estimate, with comparable sales growth of 8% excluding gasoline prices and foreign exchange impacts [4] - In the U.S., comparable sales increased by 7.9%, while Canada and Other International markets saw gains of 7.8% and 8.5%, respectively [4] Membership Growth - The company ended the quarter with 79.6 million paid household members, a 6.8% increase year over year, with executive memberships growing by 9% to 37.6 million [5] - Executive members now account for 47.3% of all paid members and drive 73.1% of worldwide sales [5] Analyst Estimates - Analysts have raised their estimates for the current fiscal year by 6 cents to $18.02 and for the next fiscal year by 14 cents to $19.90, indicating expected year-over-year growth rates of 11.9% and 10.4%, respectively [6] Membership Revenue - Membership fee income rose 10.4% year over year to $1,240 million in Q3, with a recent membership fee increase contributing about 4.6% to this income [9] Digital Expansion - E-commerce comparable sales increased by 14.8% in Q3, with Costco Logistics seeing a 31% rise in items delivered [12] - The company is also investing in digital transformation initiatives, including a Buy Now, Pay Later program in partnership with Affirm [12] Competitive Landscape - Costco's sales figures are part of a broader retail environment with increasing competition from companies like Ross Stores, Dollar General, and Target [13] Valuation - Costco stock has outperformed the industry, rallying 26.4% over the past year compared to the industry's 13.8% gain [15] - The stock is trading at a forward 12-month price-to-earnings ratio of 54.42, significantly higher than the industry average of 34.39 and the S&P 500's 21.82 [16]