The initial market response to Costco’s (NASDAQ: COST) FQ3 earnings release is that comps were tepid. However, tepid is in the eye of the beholder, and the 8.0% adjusted increase is a solid figure regardless of its comparison to consensus estimates.
The primary takeaway for investors is that the business remains healthy, with reliable cash flow and capital returns flowing.
Here are five reasons the stock price is expected to reach a new high in 2025: the only questions are when and by how much it will increase.
1. Growing Costco Performs Well Despite Headwinds
Costoc faces headwinds like any retailer in 2025, but it is performing well despite them. The FQ3 results reveal revenue growing by 8% year-over-year, outpacing the consensus estimate, its competitors, and the retail industry, with strength in ticket average and traffic. On a comparable-store basis, the U.S. performed the strongest, with a 7.9% gain, adjusted for fuel price fluctuations. Canadian sales were also solid at 7.8%, as were Other International at 5.5%.
Digital, one of the company’s growth pillars, grew by 15.7% and is likely to continue expanding at a robust pace due to increased investment. The margin news is also positive, with gross and operating margins widening compared to the prior year. The net result is a nearly 13% increase in net income, specifically $1.9 billion, and an expectation of continued strength as the year progresses.
2. Costco’s Outlook Is Positive: Plans to Invest in Digital and Warehouses
Costco doesn’t give specific guidance, but investors can glean insight from management’s tone and outlook. The company acknowledges uncertainty but remains confident that it can continue to deliver value to its members. Among the efforts underway are supply chain adjustments targeting more localized products in the countries and regions affected by tariffs.
The company is also expanding its warehouse footprint and investing in digital. Digital investments run the range from e-commerce to warehouse automation. Highlights include positive initial results from a buy-now-pay-later feature, which allows members to purchase big-ticket items at exclusive rates.
3. Costco’s Next Special Dividend Is Closer Than Ever
One of Costco’s key investment attractions is its strong cash flow, capital return, and history of special dividends. The repurchases are a token amount, reducing the share count microscopically in FQ3, and the regular dividend isn’t much better, yielding about 0.5% in mid-2025, but the special dividends offset them.
The company tends to pay special dividends every few years when the cash balance reaches a high-teen billion-dollar figure, which is likely by the end of the year. The cash flow in F2025 has increased the balance by 40% to $13.836 billion, putting it on track to top $15 billion by year’s end.
The company may not make the payment until sometime in F2026; the upshot is that the longer they wait, the larger it will likely be. The last payment, made in 2023, was worth $15 per share to investors, or approximately 1.5%.
4. Analysts Support Firms, Upside Potential for COST Stock Increases
[content-module:Forecast|NASDAQ: COST]The initial analyst’s response, as tracked by MarketBeat, is mixed, with a single price target reduction.
However, the price target reduction aligns with the high end of the analysts' range, a gain of more than 10% when reached.
The critical details are that the remaining six revisions tracked within the first 12 hours of the release include price target increases that lead to the high-end range and a new all-time high.
Their average puts the market near $1135, and institutional investors also provide a tailwind, owning nearly 70% of the stock and buying on balance in 2025.
This combination of analyst optimism and institutional support suggests that confidence in the company's long-term trajectory remains intact. Investors will be watching closely to see if upcoming results validate these bullish targets.
5. Costco’s Uptrend Is Intact, Chart Looks Bullish
Costco’s chart appears bullish, and the price remains in an uptrend despite a 1% pullback following the Q3 release. The market is above the critical moving average and poised to move higher in late spring. The critical points of resistance are near $1,050 and $1,075 and will likely be tested soon.
If the market can get above them, new highs will likely follow. The risk is that COST stock will remain capped until later in the year due to uncertainties. The catalyst in this scenario is the Q4 results and outlook for F2026.
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