A Solid Quarter Keeps Analysts Upbeat on Costco, but They Claim the Company is Overvalued

Costco delivered impressive third-quarter results that boosted confidence among Wall Street analysts in the wholesale retailer's continued strength and market dominance. The company, known for its membership-based business model, beat analyst expectations on both revenue and profit for the quarter ending May 11, reinforcing investor faith in its long-term prospects.

‍

Costco is projected to generate $275 billion in sales for its current fiscal year. The recent quarterly performance reflected strong customer traffic and high member loyalty—two factors analysts cited as essential to the company’s ability to navigate challenges such as shifting U.S. trade policies and potential tariffs.

‍

Year-to-date, Costco shares have risen 14% in 2025, well ahead of the S&P 500, which has remained relatively flat. This growth follows an extraordinary two-year run from the beginning of 2023 through the end of 2024, during which the stock more than doubled. Despite this strong upward momentum, analysts believe future stock appreciation may be limited. The consensus forecast indicates just a 3.4% gain over the next 12 months, suggesting that much of the company’s success is already priced into the stock.

‍

Bernstein analysts, for instance, described the stock as “priced for perfection,” implying there’s little room for error if investors are to see further gains. However, Friday’s market action showed optimism remained: Costco shares climbed 3.1% following Thursday’s after-market earnings release.

‍

Here's how major Wall Street firms responded to Costco's third-quarter report:

Bernstein – “Outperform” rating, $1,153 price target
Analyst Zhihan Ma projected an 11% upside from Friday’s closing price of $1,040.18. Ma highlighted Costco’s significant appeal to consumers, noting that its comparable sales growth continues to exceed those of peers. Ma expects the company will keep expanding its U.S. and international store presence at a steady pace. Given its current growth trajectory, Ma believes Costco has a “long runway” for expansion well into the future.

‍

Morgan Stanley – “Overweight,” $1,225 target
Analyst Simeon Gutman raised his price target from $1,150 to $1,225, indicating an expected 18% increase from current levels. Gutman emphasized Costco’s consistent growth in both comparable sales and membership base, noting its value proposition is further enhanced by limited exposure to the volatile e-commerce landscape. Despite its high valuation, Gutman supports the stock based on what he describes as its “scarcity value, safety, and scale.”

‍

UBS – “Buy,” $1,205 target
UBS analyst Michael Lasser praised Costco’s ability to maintain its performance even amid uncertainties such as tariffs and labor-related costs. He applauded the company’s consistency and ability to protect its margins despite headwinds like LIFO (last-in, first-out) inventory accounting charges. Lasser believes that Costco's dependable execution and its protective “moat around value” position it well to continue outpacing competitors.

‍

Deutsche Bank – “Buy,” $1,106 target
Krisztina Katai from Deutsche Bank forecasted a more modest 6% upside. Nonetheless, she maintained a bullish outlook, pointing to opportunities in Costco’s evolving business model, particularly in retail media and supply chain improvements. She expects these initiatives to further enhance profit margins while the company continues to grow its market share and top-line revenue.

‍

Wells Fargo – “Equal Weight,” $1,000 target
Edward Kelly of Wells Fargo took a more cautious stance, assigning an “Equal Weight” rating with a $1,000 target. He acknowledged Costco’s strong fundamentals and defensive appeal in the consumer space. However, Kelly warned that the stock’s current valuation makes the risk/reward profile less attractive.

‍

While he credited Costco for gaining market share and benefiting from its recurring membership income, he expressed skepticism about sustained margin expansion and believed the current stock price already reflects much of the long-term growth potential.

‍

In summary, Costco’s third-quarter results reaffirmed its status as a retail leader with unmatched customer loyalty and solid operational execution. Analysts generally remain bullish, citing its growth consistency, strategic positioning, and resilience in the face of external pressures like tariffs.

‍

However, concerns about valuation linger. While Costco’s fundamentals remain robust, its recent stock performance suggests limited near-term upside unless the company continues to exceed already high expectations. For investors, the message is clear: Costco remains a best-in-class operator, but future gains may be harder to come by unless new growth drivers emerge.

‍