Costco pops on a revenue beat, then cools as growth slows. The market is split. Bulls see resilient demand and a powerful membership engine. Bears see a rich stock facing a slower U.S. shopper.
What just happened
I am tracking Costco shares at 884.48 dollars as of mid session. The stock is up about 1.1 percent. It has traded between 871.98 and 891.00 dollars on roughly 2.8 million shares. The move started after Costco posted first quarter revenue of 67.31 billion dollars, a touch above the 67.14 billion dollar consensus. The headline beat landed. The details raised eyebrows.
Inside the report, U.S. comparable sales cooled. They rose 5.9 percent for the quarter. November slowed to 5.8 percent, down from 6.7 percent in October. Two year U.S. comp growth stepped down from 12.5 percent to 10.1 percent. Traffic eased as well. That is why the tape is choppy today. Buyers like the beat. Skeptics fear the fade.
I also saw brisk positioning into the print. Technicals flipped from neutral to positive, with a fresh momentum push. Options flow pointed to active call buying ahead of results. That energy helped power the early pop, then faded as investors dug into comps.
Intraday action shows heavy two way trading near 880 dollars, with dip buyers active below 875 dollars.
Why a beat can coexist with caution
This is a classic retail split screen. Revenue topped estimates, which says demand is still healthy. Yet the growth rate is slowing in the U.S., which is the core engine. When comps decelerate, the market asks if this is the start of a trend or a brief pause.
Several forces could be at work. Consumers are careful on big ticket items. Gas prices and food inflation have eased, which can trim reported comp growth. Holiday timing can shift month to month. None of that changes the bigger point. The growth curve is bending lower. That matters for a stock that already trades at a high multiple.
Costco’s model is still elite. Renewal rates remain high. Private label is strong. Expansion outside the U.S. continues. Those levers support the long case. The near term picture, however, depends on traffic, basket size, and margin mix through the holidays.
Valuation sits near historic highs on price to earnings. Even small slowdowns can hit a premium multiple.
The valuation debate, now louder
With the stock near the high 800s, the multiple bakes in years of steady gains. That is fine when comps accelerate. It is risky when comps cool. The current print gives both sides ammo. Bulls point to a beat, clean inventory, and steady membership income. Bears highlight the step down in U.S. comps and softer traffic.
I am watching how the market prices the next few quarters. If growth reaccelerates, the multiple holds. If it slows further, the multiple likely compresses. That is the fulcrum for the stock from here.
Focus on the two year comp trend to smooth out monthly noise. It is sliding, which deserves attention.
What to watch next
Here are the tells that will decide the next leg:
- Traffic growth, both in club and online
- Two year U.S. comps, not just month over month
- Membership adds and renewal rates, especially in newer markets
- Operating margin, including fresh food and ancillary businesses
- New club openings and early productivity
Investment take
For long term investors, the core story remains attractive. The membership flywheel is hard to copy. Global growth is runway rich. Cash generation gives room to invest, pay dividends, and, at times, consider special payouts.
For shorter term traders, respect the tape. Momentum was hot into earnings, then mixed as comps cooled. Expect more swings around monthly sales updates. Risk control matters with a premium stock at an inflection point.
In plain terms, Costco earned its pop with a revenue beat. The stock will need cleaner comp trends to earn more multiple expansion.
Frequently Asked Questions
Q: Why did the stock rise if U.S. growth slowed?
A: Revenue beat expectations, and traders had positioned for strength. That lifted shares, even as comps decelerated.
Q: Is the slowing U.S. comp a red flag?
A: It is a caution, not a crisis. Watch the two year comp and traffic. If both keep falling, the risk grows.
Q: Is valuation a problem now?
A: It can be. A high multiple needs steady growth. If growth slips, the multiple can contract and press the stock.
Q: What metrics matter most next quarter?
A: Traffic, two year comps, membership health, and margins. These will show if demand is steady or softening.
Q: Should investors buy, hold, or wait?
A: Long term holders can stay patient. New buyers may want a pullback or a reacceleration in comps before adding.
Conclusion: Costco delivered on the top line, then ran into the gravity of slowing comps and a rich valuation. The long game still looks strong. The next few months, and those key metrics, will decide whether the stock breaks higher or takes a breather.
