Costco Stock to $650?
Note: Costco FY’24 ended on September 1, 2024.
In a retail landscape marked by constant flux, Costco’s (NASDAQ: COST) has emerged as a beacon of stability and success, driven by its relentless focus on revenue growth and customer satisfaction. The warehouse giant’s stock was up 5% year-to-date, until very recently, outperforming the S&P 500 which was down 2%. Now, in the past week, COST stock has lost over 10%, while the S&P lost 3.8%. Year-to-date the stock is still ahead, dropping 2.5% vs. a 6% drop for the index. However, the stock is acting weak, as of mid-day on Thursday, March 13, and is down a further 3.6% today, with the S&P sliding 1.3%. Amidst rising living costs, Costco’s value-centric proposition has resonated with consumers, as evident in its 9% y-o-y sales growth in January 2025, outpacing the U.S. retail sector’s 4% sales growth.
But Here’s The Thing: Even Costco isn’t immune to economic downturns. As recently as 2022, Costco’s stock price plummeted by as much as 30% over just a few quarters, highlighting its vulnerability to market volatility. This historical precedent raises concerns that Costco’s current share price of around $940 could potentially drop to $650 levels if similar market conditions recur. However, for investors who seek lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative, having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
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- Up 23% Since Beginning of This Year, Will Costco’s Strong Run Continue Following Q3 Results?
- Up 8% This Year, Why Is Costco Stock Outperforming?
- Does Costco Stock Have More Room For Gains After Rising 40% in 2023?
- What To Expect From Costco’s Stock Post Q4 Results?
Why Is It Relevant Now?
Again, while Costco might be promising great things with its plans for international expansion, widening product offerings, and exclusive membership rewards, there is a larger risk to the U.S. economy, which is worth factoring in right now.
Costco’s business model is dependent on international trade, with approximately one-third of its U.S. sales generated from imported products. Notably, the company’s import exposure is diversified, with less than 20% of imports sourced from China, Mexico, and Canada.The proposed 25% tariff on Canadian and Mexican imports poses a significant risk, potentially driving up grocery prices and leading to shortages of essential items in the U.S. Additionally, tariffs on Chinese imports may also drive up the prices of electronics and furniture sold at Costco.
While inflation fears have eased, they still linger. Trump’s aggressive stance on tariffs and immigration has reignited concerns about inflation’s potential return. This uncertainty, combined with the U.S. economy’s vulnerability to a downturn, raises the specter of a recession. See our analysis here on the macro picture. The global geopolitical climate has grown increasingly volatile, marked by the ongoing Ukraine-Russia conflict, escalating trade tensions, and frayed relationships with traditional allies such as Canada, Mexico, and Europe. These factors introduce substantial risks, underscoring the importance of closely monitoring the macroeconomic outlook.
How resilient is COST stock during a downturn?
COST stock has been more resilient than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• COST stock fell 30.6% from a high of $600.04 on 8 April 2022 to $416.43 on 20 May 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 7 December 2023
• Since then, the stock has increased to a high of $1,076.86 on 13 February 2025 and currently trades at around $940
Covid Pandemic (2020)
• COST stock fell 13.6% from a high of $324.08 on 20 February 2020 to $279.85 on 12 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 9 July 2020
Protecting Wealth
In summary, it also doesn’t help that Costco’s stock is still expensive. The company stock’s current valuation of 58 times last year’s earnings appears stretched, significantly exceeding the pre-pandemic price-to-earnings range of 25 to 30. Now, Costco’s Revenue growth has slowed down, with FY 2024 marking the slowest growth in seven years. So yes, while we all love Costco for low prices and convenient services – ask yourself the question: do you want to hold on to your Costco stock now, will you panic and sell if it starts dropping to $800, $700, or even lower levels? Holding on to a falling stock is never easy. Trefis works with Empirical Asset Management — a Boston area wealth manager — whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
| Returns | Mar 2025 MTD [1] |
2025 YTD [1] |
2017-25 Total [2] |
| COST Return | -8% | 5% | 605% |
| S&P 500 Return | -3% | -2% | 158% |
| Trefis Reinforced Value Portfolio | -4% | -5% | 643% |
[1] Returns as of 3/9/2025
[2] Cumulative total returns since the end of 2016
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