Costco Stock: Why the Recent Dip is a Buying Opportunity
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Despite concerns over slowing renewal rates, Costco (NASDAQ: COST) remains a strong growth story, presenting a compelling buying opportunity for long-term investors.
Costco, a long-time investor favorite, has seen its share price decline by 10% over the past year. This dip is partially attributed to investors shifting funds towards high-growth sectors like artificial intelligence, but also stems from anxieties surrounding the company’s membership renewal rates. However, a closer look reveals a resilient business still delivering impressive results.
Some investors have expressed worry that Costco’s growth trajectory isn’t as robust as in previous years. Specifically, concerns have centered on a slight deceleration in membership renewal rates. One analyst at Roth Capital recently reported that membership sign-ups in the most recent quarter totaled 400,000, a significant drop from the typical 1 million.
However, Costco’s management attributes this decrease largely to a shift in demographics. According to the company’s first quarter earnings call, a growing number of younger shoppers are signing up for memberships online, and this cohort tends to renew at a slower pace. Gary Millerchip, Chief Financial Officer, stated, “Our goal is to continue to improve renewal rates by improving engagement with members who signed up digitally. Although for the reasons previously shared, we may still see a slight decline in the overall renewal rate over the next few quarters.”
Strong First Quarter Results Underscore Costco’s Strength
Despite the stock’s underperformance, Costco’s first quarter results demonstrate the company’s underlying strength. Key highlights include:
- Earnings Per Share: $4.50, exceeding Wall Street’s consensus estimate of $4.27.
- Revenue: Increased 8% to $67.3 billion, surpassing the analyst consensus of $67.1 billion.
- Comparable Sales: Rose 5.9% in the U.S. and 6.4% overall.
- Black Friday Sales: Reached a record $250 million in non-food orders.
These figures indicate that the market may be overlooking the bigger picture: Costco is still experiencing substantial growth. The company also reported a 20.5% increase in digital sales, a 24% rise in website traffic, and a 48% jump in mobile app traffic during the quarter.
Membership Numbers Remain Impressive
Despite a slight dip, Costco’s membership renewal rates remain remarkably high. The company currently boasts 81.4 million paid members, a 5.2% increase year-over-year. North American renewal rates stand at 92.2%, only slightly below the company’s average of 93%. As one analyst noted, these rates are still enviable by any standard, especially considering the strong overall performance.
A Buying Opportunity for Long-Term Investors
The recent decline in Costco’s share price presents a valuable buying opportunity for investors who recognize the company’s continued success in expanding sales, earnings, and customer loyalty. Even with potential volatility in the coming quarters, the fundamental strengths of Costco remain intact. For those with a long-term investment horizon, Costco stock appears attractively priced.
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Stock Advisor returns as of December 22, 2025. Chris Snow has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
