Costco Stock Slides as Investor Concerns Outweigh Q4 Earnings Beat
Shares fell 2.5% as weaker same-store sales and a dip in membership renewal rates overshadowed strong quarterly results, prompting analyst caution.
Costco Wholesale Corporation (NASDAQ: COST) shares declined 2.5% in recent trading, making it a notable underperformer despite the company reporting fourth-quarter financial results that surpassed analyst expectations. The sell-off highlights growing investor anxiety over slowing growth momentum and a slight deterioration in membership metrics, which overshadowed an otherwise solid earnings report.
The warehouse retail giant announced diluted earnings per share of $5.87 on revenue of $86.16 billion for the quarter. While this performance , the market reaction was driven by underlying details in the report. Trading volume was significantly elevated at 1.6 times the 20-day average, signaling heightened investor activity around the results.
The primary points of concern stemmed from a deceleration in comparable store sales, which hit a six-quarter low, and a 40-basis-point dip in membership renewal rates. While total same-store sales rose a respectable 5.7%, the cooling trend was enough to spook investors, who have grown accustomed to Costco's consistent outperformance. This sentiment was echoed by some Wall Street analysts who questioned the stock's premium valuation in the face of these headwinds.
Roth Capital, for instance, maintained a 'Neutral' rating, arguing that softening growth makes the stock's current valuation difficult to justify. Similarly, Truist trimmed its price target, citing the stock's rich valuation of approximately 50 times projected earnings as a challenge for new investment. Even with the dip, one analyst noted the stock remains a for long-term investors, given its resilient business model.
However, not all feedback was cautious. JPMorgan maintained its 'Overweight' rating, viewing the dip in renewal rates as "unconcerning," while Oppenheimer suggested that any post-earnings volatility could present a buying opportunity. Costco's management remains focused on expansion, with plans to in the upcoming fiscal year. For now, investors are weighing the company's proven operational strength against signs that its rapid growth may be entering a slower phase.