What Happened?
Shares of membership-only discount retailer Costco (NASDAQ: COST) fell 2.3% in the morning session after the company reported underwhelming third quarter results with sales and earnings roughly inline with expectations.
The membership-only retailer posted revenue of $86.16 billion, an 8.1% year-over-year increase that narrowly beat the consensus estimate of $85.91 billion. Its earnings per share of $5.87 also surpassed analyst forecasts of $5.81. Additionally, the company reported strong same-store sales growth of 6.4% year on year. The negative stock reaction to the positive report suggests that high expectations were already priced into the shares, which trade at a premium valuation. With the results not providing a significant upside surprise, some investors likely took the opportunity to book profits.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Costco? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Costco’s shares are not very volatile and have only had 3 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 7 months ago when the stock dropped 6.6% on the news that the company reported weak fourth quarter results: its operating margin showed no expansion year on year, and its EPS missed.
The standout result for the quarter was a 9.1% increase in sales, fueled by an 8.3% gain in U.S. comparable sales and a strong 20.9% surge in e-commerce sales. International markets saw weaker gains, with Canada up just 4.6% and other regions lagging further behind. Looking ahead, Costco's strong e-commerce momentum and resilient U.S. sales should position it well against broader retail headwinds. Overall, this was a mixed quarter, given the limited profit gains.
Costco is up 1.7% since the beginning of the year, but at $924.40 per share, it is still trading 14.2% below its 52-week high of $1,077 from February 2025. Investors who bought $1,000 worth of Costco’s shares 5 years ago would now be looking at an investment worth $2,646.
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