Costco Could Be Poised for Major Gains Before 2030. Here Is Why Now May Be the Time to Buy.

Costco reported fiscal 2025 membership fee revenue of $5.32B (+10% YoY) and strong renewal rates (92.3% U.S./Canada, 89.8% worldwide), reinforcing high-margin recurring income. In Q3 fiscal 2026, membership fee revenue rose 10.7% YoY to $1.37B, with paid memberships up 4.1% and executive memberships up 9.6%, while digitally enabled comparable sales grew 21.5%. With $13.3B operating cash flow and ~$14B cash as of fiscal 2025, Costco can fund ongoing warehouse expansion (931 warehouses worldwide) and continued capital returns, including a raised regular dividend.

Analysis

Costco’s real equity story is not merchandise margins; it is the embedded subscription stream, which behaves more like annuity revenue than retail traffic. That matters because it lets the company undercut peers on shelf price without needing to monetize every trip, widening the gap versus conventional grocers and smaller club formats that lack a comparable fee-funded pricing shield. The second-order effect is that Costco can keep taking share in inflationary or recessionary tape while suppliers absorb more of the pricing pressure.

The bigger question for the next 1-3 months is not whether the model is good, but whether the market is already paying for perfection. A premium multiple is sustainable only as long as fee growth, renewal rates, and new-unit returns all stay above a high bar; any deceleration in executive membership mix or a moderation in renewal cadence would likely compress the multiple faster than the operating model itself deteriorates. In other words, the downside is usually valuation first, fundamentals second.

Over 6-18 months, the key catalyst is unit expansion, especially outside the core U.S. base, because international warehouses can extend the runway even if domestic comps normalize. The contrarian view is that the market may be underweighting how much of COST’s upside is already reflected in the stock: if consumer trade-down continues, the business can outperform operationally, but investors may still get only mediocre returns if the multiple mean-reverts. The thesis is falsified if membership revenue growth falls into low-single digits or if renewal rates slip meaningfully below current levels for more than one quarter.

Key Decisions for Investors

• Watchlist, not chase: wait for a 5-8% pullback in COST before adding fresh long exposure; upside is likely lower from current levels unless next quarter re-accelerates membership fee growth.
• For existing COST longs, consider a 3-6 month covered-call overwrite to monetize elevated valuation while retaining core exposure; best risk/reward if implied vol stays bid into earnings.
• Relative-value idea: long COST / short XRT over the next 6 months to isolate the fee-income moat versus broad retail margin pressure; thesis breaks if COST’s renewal or fee growth trends materially weaken.
• Set an alert on renewal-rate deterioration or membership-fee growth below high-single digits; that is the earliest signal the premium multiple is no longer justified.