Costco Beat Earnings Expectations in Q1. Here's Why It Could Still Struggle in 2026.

Core Viewpoint - Costco's stock performance is under scrutiny despite strong earnings, as it is perceived to be overpriced given its current growth rate and high valuation [4][6][8] Financial Performance - Costco reported net sales growth of over 8%, reaching just under $66 billion for Q1 of fiscal 2026, which ended on November 23, 2025 [5] - The company's stock is currently trading at a price-to-earnings multiple of 46, indicating a high premium for a retailer with single-digit growth [6] Market Sentiment - Despite beating earnings expectations, Costco's stock has declined by 6% this year, reflecting investor concerns about its high valuation and economic conditions [2][4] - The lack of guidance from the company regarding future demand has left investors uncertain about its performance in upcoming quarters [7] Investment Considerations - Costco may still be a solid long-term investment due to its strong fundamentals, but short-term declines could be expected without significant growth opportunities [8][9] - The current valuation does not provide a margin of safety for investors, especially if economic conditions worsen [8]