Should I Buy Costco (COST)? Finance YouTuber Analysis

The analyst believes Costco is a best-in-class business with strong growth and customer loyalty, but its current valuation at a forward P/E of 44 is too high compared to other major companies. He would only consider buying if the price dropped by 10-15% from its current level, making the recent 4% dip insufficient for a buying opportunity.

“I don't see this as a buying opportunity on the dip. I still think Costco is a great business, but I'm waiting to get a better price before I purchase Costco or upgrade Costco stock to a buy.”

Hoium recommends selling Costco, citing its high valuation with a P/E of 51 times earnings, despite its consistent but moderate growth. He believes that like Walmart, Costco's stock performance has been heavily influenced by multiple expansion, and it's more likely to experience multiple compression in the next 5-10 years, acting as a headwind for future returns.

“I think it's much more likely that over the next 5 to 10 years, you're going to see multiple compression. So, these price to earnings multiples go from 40s and 50s down to in the teens, maybe in the 20s.”

The YouTuber advises avoiding Costco due to its high valuation, with a P/E of 54 and a tripling of its price-to-sales multiple over the past decade. While its growth rate is better than Walmart's, it is slowing (9.2% 10-year CAGR, 6.7% 3-year CAGR). He warns that current expectations are sky-high, and multiple compression alone could cause a significant stock drop.

“Costco has always been a relatively expensive stock, but right now you have a market cap $450 billion. Priced earnings multiple is 54.”

The YouTuber argues that while Costco is a phenomenal business with a unique membership-based model, its current valuation is too high. The stock trades at a P/E multiple of 60x and a P/S of 1.7x, which is not justified by its relatively modest 5% revenue growth rate. The company's growth is also limited by the physical constraints of opening new warehouses and managing membership density.

“From that perspective I don't think Costco is a great buy today but it is a great company to learn from because it really pioneered and showed the value of the membership business model.”

The YouTuber states that while Costco is a phenomenal business with a strong membership model and recent positive news regarding membership fee increases, the current valuation is too high. He notes the stock trades at 52 times trailing earnings, while growth expectations are modest (6% over the next two years), making it unattractive at its current price.

“I'm not a buyer of Costco right now just because that price is scaring me away. It is a phenomenal business, it's one that I would love to own in the future but I would love to pay a much more reasonable price much more like a market price of 25 even 30 times earnings as opposed to nearly double that where Shares are trading today.”

The YouTuber advises avoiding Costco stock despite acknowledging it as a phenomenal business. The primary reason is its current valuation, trading at 53 times earnings, which is considered excessively high for a company with single-digit revenue growth. He argues that while the business model is strong, the stock's price has gotten 'out of control' due to multiple expansion, making it a poor investment at its current price.

“I don't want to pay 53 times earnings that is just an that is just a crazy multiple from the for the revenue and earnings growth that you're going to get from the stock.”

The YouTuber argues that Costco's stock is currently too expensive, trading at a forward P/E of 34.5, which is very high compared to its historical net income growth rate of 13.2% over the past decade. While acknowledging Costco's superior and sustainable business model compared to competitors like Target and Walmart, the current valuation makes it an unattractive buy despite its strong fundamentals.

“The challenge for Costco is always what are you going to pay for the stock and right now this stock is absolutely not cheap.”

The YouTuber advises buying Costco, highlighting its position as a major importer that benefits from reduced tariff costs. They specifically point to Costco as a company to watch for how it handles potential tariff refunds, suggesting this could be a significant, underappreciated catalyst.

“And keep an eye on Costco specifically for how they're going to handle that savings. That could be a catalyst that nobody else really sees coming.”

The YouTuber suggests avoiding Costco due to its high valuation, trading at a P/E ratio of 54.5. While acknowledging its faster growth (10.5% revenue, 15.6% earnings) compared to Walmart, he still considers this multiple extremely high for the growth rate, making it an expensive and potentially risky investment.

“So all around it seems like Costco is growing faster than Walmart, but still for 10% topline growth and 15% earnings growth, a 54 price to earnings ratio is extremely extremely high.”

The YouTuber advises against buying Costco, stating that while it's a fantastic company, its current valuation of 50-60 times cash flows is very expensive. He believes investors are disregarding valuation due to past market performance, but this trend is unsustainable.

“I think Costco is a a fantastic company but I think the price of it is very expensive now.”

The YouTuber views Costco as a solid dividend play with no significant business problems or threat to its dividend, despite the current economic slowdown. However, he notes it's not a high-growth stock and requires patience, suggesting it's not a 10x opportunity.

“If you're looking for a dividend play, this right here is a solid dividend player. I don't think people are going to magically, you know, quit using Costco and Costco's on its way to bankruptcy or anything else of that nature.”

The analysis suggests that Costco, along with Amazon and Walmart, will be among the long-term winners in the e-commerce space as agentic commerce develops. These large retailers are expected to benefit from a 'steepening of the power curve,' where their existing advantages in pricing, inventory, and logistics allow them to capture a larger share of the market, despite increased competition at the margins.

“It's like you got Walmart, you've got Amazon, you've got Costco, and it's like they're just going to keep taking share slowly.”

The YouTuber considers Costco to have the 'best business model in the world' due to its strong customer loyalty, high retention rates, and annuity-like membership income stream, which translates almost purely to profit. While he acknowledges its exceptional qualities, he is currently holding due to its high valuation and would only buy if its P/E ratio drops below 40.

“I will buy Costco when it goes back down to below a 40p ratio when it gets into the 30s. that's at a more reasonable price, a trailing 30p ratio. But when it's at the 60s and50s, that to me is just too extreme.”

The YouTuber advises against buying Costco shares at current levels, noting its valuation is at the high end of its historical P/E range (55x vs. 33-55x). While acknowledging Costco as a high-quality company with strong fundamentals, he prefers to buy it closer to a 33x forward P/E. He plans to hold his existing position but not add more.

“I wouldn't recommend buying Costco hair. I'm not buying it hair whenever it pays a dividend I invest it into a different company from what I've seen historically Costco trades somewhere between a 33 and a 55 Ford PE ratio so right now at a 55 it is at the high end of that trading radius I'd rather buy the company when it's closer to the 33 range.”

The YouTuber suggests Costco as a 'buy and hold forever' stock, emphasizing its highly defensible business model centered on membership fees rather than sales margins. This model allows Costco to offer the lowest prices to customers while generating stable, predictable profits from memberships, smoothing out retail volatility and making it difficult for competitors like Walmart or Target to replicate.

“Costco is not a seller of goods that's not the way that they view their business model they view themselves as a buying agent on behalf of their customers.”

The YouTuber is bullish on Costco due to its resilient membership-based business model, which generates significant profit from high-retention fees. He highlights the recent membership fee increase as a pure profit driver and notes strong e-commerce expansion, which has higher profit margins. Additionally, Costco is considered a defensive stock with recession resistance, as people continue to buy bulk essentials during economic downturns.

“I'm really bullish on Costco. And I think that right now where it's trading at at, you know, $1,18. If we look at the chart right now, I think that of course it's hard to sell puts on this stock because that would be a lot a lot of um capital. So, not everyone can do that. And Costco does not have the best options. So, I'm looking at Costco as a pure stock play, purely holding stock.”

The YouTuber highly recommends Costco, calling it one of the best-run companies globally. He emphasizes its resilience during economic downturns due to its strong business model, subscription plan, and leadership, making it a solid long-term investment.

“One of the best ran, if not the best ran company in the world is Costco. You need to have this. when you don't know if we're going to go into a recession, if you don't know if we're going to have all kind of unforeseen events take place, one particular company that can withstand all of it or just withstand better than most is Costco.”

The analyst recommends Costco, noting it was the fourth most loved brand for Boomers in a recent survey. He highlights its stable revenue and sales growth, which contribute to solid double-digit returns despite a modest dividend yield, aligning with the Boomer spending theme.

“Boomers love shopping at Costco ticker coost which was the fourth most loved brand for the group in last last year survey and while the dividend yield isn't anything special on this stock the share price produces a solid double digit return on that stable revenue and sales growth”

The YouTuber views Costco as an interesting stock that has only dipped slightly during the pullback. The company could see stronger sales due to recent marketing success with gold bars, which also drives traffic for necessities, leading to increased overall purchases. This positions Costco to perform well in the current environment.

“Costco Wholesale Corporation take our coost this is an interesting one cuz this one's down just 6% over the pullback period and could report stronger sales from its recent marketing win selling gold bars.”

The YouTuber advises selling down Costco shares to reduce portfolio concentration. With Costco making up 20.9% of the portfolio, he argues that such a large allocation to a single stock introduces excessive risk, even for a good company, and recommends limiting individual stock exposure to under 10%.

“I would definitely sell down some of that Apple or Costco shares really just to balance out the portfolio a little bit since there's no income here you shouldn't owe capital gains taxes on those but if you do then you can sell some of the stocks that have fallen to kind of zero out your taxes like we talked about”