Core Viewpoint - Investors are becoming less favorable towards Costco due to rising concerns about consumer spending, despite the broader stock market performing well [1][2]. Company Performance - Costco's stock is down 3.3% year-to-date, marking its underperformance relative to the S&P 500, a trend not seen since 2002 [2]. - The company has been navigating a challenging operating environment effectively, with moderate sales and earnings growth, while other retailers are struggling [3]. - Costco's operating income from merchandise is less than 2% of its revenue, indicating strong value offerings that contribute to high customer loyalty and membership renewal rates [4]. Financial Metrics - Costco's earnings increased after raising membership fees, but its latest same-store sales growth fell slightly below expectations [5]. - The company maintains an efficient supply chain and benefits from its private label, Kirkland Signature, which enhances margins across product categories [6]. - Costco's gross margin stands at 12.84%, and it has a market capitalization of $405 billion [8]. Valuation Concerns - Despite delivering solid results, Costco's stock is considered overvalued, with a price-to-earnings (P/E) ratio significantly higher than its 10-year median of 36.4 [10]. - The stock's forward earnings multiple exceeds that of high-growth AI stocks like Nvidia and Broadcom, indicating a premium valuation [12]. - Given its high valuation and low dividend yield of 0.55%, Costco may not be an attractive buy for investors looking for passive income [13]. Investment Alternatives - Investors are advised to consider other growth stocks with reasonable valuations or value stocks like Coca-Cola and PepsiCo, which have strong dividend histories and better yield prospects [14].