Costco stock holds steady as UBS reiterates Neutral rating

Costco (NASDAQ:COST) reported strong Q4 2025 results, with EPS of $5.87 and revenue of $86.16 billion both exceeding consensus, driven by robust comparable sales growth of 5.7% overall and better-than-expected membership fee income. However, EBIT dollars slightly missed estimates, and growth in this metric showed signs of slowing, with UBS noting the EPS beat was partly due to below-the-line items. Analyst sentiment is mixed, with Goldman Sachs and Morgan Stanley raising price targets to $1,218 and $1,130 respectively, while UBS maintains a Neutral rating and $1,000 target, highlighting the stock's current trading above its fair value despite Costco's strong retail position.

Analysis

Costco (COST) delivered strong top-line results in its recent quarterly report, with revenue of $86.16 billion and earnings per share of $5.87, both narrowly beating consensus estimates. This performance was driven by robust comparable sales growth of 5.7% overall (6.4% excluding gas and currency effects) and higher-than-expected membership fee income, contributing to an 8.2% revenue increase over the last twelve months. However, the operational picture presents a more nuanced view. EBIT dollars slightly missed consensus, and its growth is reportedly slowing. Furthermore, UBS noted that the EPS beat was partially inflated by below-the-line items, suggesting a lower quality of earnings than the headline number implies. Analyst sentiment is consequently mixed; while Goldman Sachs raised its price target to $1,218 on the strong results, UBS maintained a Neutral rating with a $1,000 target, citing that high expectations were already priced in and that the stock trades above its Fair Value according to InvestingPro data.

Key Decisions for Investors

• Investors should weigh the company's strong top-line performance, including 6.4% core comparable sales growth, against its premium valuation and signs of slowing EBIT growth.
• The quality of the recent earnings beat warrants scrutiny, as it was partially driven by below-the-line items; monitor future reports for sustained core operational profitability, not just accounting-driven outperformance.
• Given the wide dispersion in analyst price targets, ranging from $975 to $1,218, and a neutral rating from UBS, a hold stance may be prudent until there is clearer evidence that core profit growth can re-accelerate to justify the stock's valuation.