Fractional Shares vs. Stock Splits: Why Costco's $1,000+ Valuation Is a Retail Investor's Advantage

In an era where stock splits have become a symbol of investor accessibility, Costco Wholesale (COST) has defied convention. Trading near $1,050 per share as of May 2025, the retailer's sky-high valuation has sparked debates about whether a stock split is overdue. Yet, a closer look reveals that Costco's strategy—eschewing splits in favor of fractional shares—could be a masterstroke for both retail investors and long-term value. Let's dissect why the absence of a split isn't a barrier to entry, and why now might be the perfect time to invest.

The Split Debate: Why Costco Says No

Costco's CFO, Gary Millerchip, has been unequivocal: a stock split is “unnecessary.” The company's rationale hinges on two pillars. First, fractional share trading—now mainstream through platforms like Robinhood and Fidelity—allows retail investors to buy slices of high-priced stocks. With 30% of Costco's shares held by retail investors, this accessibility negates the need to dilute shares artificially. Second, Costco's institutional ownership (70%) prioritizes long-term growth over nominal price adjustments.

The data tells a compelling story. Since its last split in 2000, COST has risen over 2,970%, outpacing the S&P 500's gains. Institutional investors, who focus on fundamentals, have rewarded this consistency.

Fractional Shares: A Game-Changer for Retail Investors

Critics argue that a $1,000+ stock price is prohibitive for small investors. Yet fractional shares democratize access. For example, an investor with $500 can buy half a share of COST, leveraging its 90.5% membership renewal rate and 15.7% e-commerce growth. This model aligns with Costco's strategy: instead of splitting shares to attract retail capital, it's using its operational strengths to fuel demand.

Consider this: Costco's 74 million global memberships and plans to open 7–9 new warehouses in 2025 ensure steady revenue growth. Fractional shares let investors participate in this growth without waiting for a split—and without diluting current shareholders' value.

The Long-Term Valuation Play: Why Higher Prices Mean More

A stock split often signals complacency. Companies split to make shares “more affordable,” but Costco's refusal to do so underscores confidence in its business model. At $1,050, COST trades at 57x 2025 earnings, yet analysts project a $1,471 price target by year-end. Why? Because Costco's $62 billion in annual net sales and 13% EPS growth reflect a durable moat:

• Membership-Driven Revenue: 90% of profits come from membership fees, creating recurring income.
• Global Expansion: 7–9 new warehouses in 2025 will tap into underpenetrated markets like Asia.
• E-Commerce Surge: A 15.7% revenue jump in Q3 2025 highlights its ability to adapt to digital shopping trends.

These factors mean Costco's valuation isn't a bubble—it's a reflection of its predictable cash flows and low debt (just 1.2x net debt/EBITDA).

The Call to Action: Buy Now, Forget the Split

Investors should stop fixating on splits and focus on what truly matters: returns. Here's why acting now makes sense:

1. Fractional Access = Immediate Opportunity: Use platforms like Webull or Merrill Edge to buy partial shares at today's prices.
2. Institutional Backing: 70% ownership by long-term funds signals stability.
3. Valuation Catalysts: E-commerce growth, membership renewals, and new warehouses will drive earnings for years.

Analysts' price targets aren't arbitrary. The average $1,100 target implies 7% upside, but the $1,471 high-end estimate suggests 40% growth—a bet on Costco's ability to sustain its dominance.

Final Verdict: Split or No Split, Costco Wins

The absence of a stock split isn't a red flag—it's a green light. Fractional shares have dismantled the old argument that high prices exclude retail investors. Meanwhile, Costco's focus on operational excellence (e.g., 90.5% membership retention) ensures its stock price isn't a gimmick but a testament to its value.

For investors, the message is clear: act now. Whether you buy a full share or a fraction, Costco's fundamentals are too strong to ignore. The stock's path to $1,500 isn't about splits—it's about execution. And right now, execution is flawless.

Disclosure: This analysis is for informational purposes only. Always conduct your own research or consult a financial advisor before making investment decisions.