Costco's $1,000+ Stock: A Splitless Success Story?

The debate over whether Costco (NASDAQ:COST) should split its stock at $1,000+ has intensified as the retailer's share price hits historic highs. With a stock price that has surged over 60% in the past year, investors are questioning whether the company's refusal to split shares undermines retail investor accessibility or reflects confidence in its fundamentals. This article argues that Costco's decision to avoid a stock split is a strategic choice that underscores its focus on long-term value creation, supported by robust operational performance, strong institutional ownership, and the rise of fractional shares.

The Splitless Strategy: A Vote of Confidence in Fundamentals

Costco has not split its stock since 2000, despite its price exceeding $1,000—a stark contrast to peers like Walmart (WMT) and Target (TGT), which have split repeatedly. Historically, splits are seen as tools to make shares more affordable for retail investors. However, Costco's management has dismissed the need for a split, citing the accessibility of fractional shares, which allow investors to buy portions of a stock.

This stance is backed by data: fractional share investing has exploded, with platforms like Robinhood and Fidelity enabling purchases of small portions of high-priced stocks. For example, shows that even as its price climbed, retail ownership via platforms like Stash and Webull increased, negating the need for a traditional split.

Valuation Metrics: Premium Pricing Justified by Growth?

Costco's valuation metrics are elevated but not yet excessive in the context of its growth trajectory. Its forward P/E ratio of 60.7 (as of May 2025) is nearly double the broader market's P/E of ~30, but it aligns with its membership-driven model and global expansion.

• Price-to-Sales (P/S) Ratio: At 1.802 (Q2 2025), this is a 50% premium to its five-year average of ~1.2x. However, this reflects strong e-commerce growth (20.9% in Q2) and rising membership fees (+7.4%).
• Operating Leverage: With $62 billion in quarterly sales and a low SKU count per warehouse, Costco negotiates favorable terms with suppliers, maintaining margins even amid inflationary pressures.

The key question is whether the premium is sustainable. Analysts note that Costco's sticky customer base (93% U.S./Canada membership renewal rate) and its Kirkland Signature brand (now a $10 billion business) justify the valuation. Yet risks remain, including margin pressures from rising wages and tariffs.

Institutional Ownership: A Majority Stake in Growth

Costco's institutional ownership stands at 68.48%, with major funds like Vanguard and BlackRock holding over 30% of shares collectively. This reflects confidence in its long-term strategy:

• Global Expansion: Plans to open 27 new warehouses in 2025, including 15 in the U.S. and seven internationally, signal geographic diversification.
• E-commerce Momentum: E-commerce sales rose 14.8% in Q3, driven by high-margin categories like jewelry. Initiatives like Costco Logistics (curated deliveries) and Costco Next (digital marketplace) aim to capture online growth.

The institutional support is evident in buying activity: over the past year, $20.17 billion flowed into Costco via institutional purchases, despite $9.92 billion in sales. highlights its outlier status in retaining institutional favor.

Management's Priorities: Growth Over Price Adjustments

Costco's leadership has consistently prioritized strategic initiatives over share price mechanics. Key moves include:
1. Membership Focus: Paid household members hit 79.6 million, with 37.6 million executive members generating 73% of sales. Membership fees rose 3% after a 2024 price hike.
2. Margin Management: Despite inflation, operating cash flow remains robust at $18 billion LTM, underpinned by its low-cost warehouse model.
3. New Services: A Buy Now, Pay Later partnership with Affirm aims to boost sales without diluting margins.

CEO W. Craig Jelinek has emphasized that “long-term value creation trumps short-term stock movements.” This philosophy aligns with Berkshire Hathaway's approach to its Class A shares, where high prices are a badge of investor confidence.

Risks and Considerations

While Costco's strategy is compelling, risks persist:
- Valuation Concerns: A P/E of 60.7 may limit short-term returns if growth slows.
- Margin Pressures: Foreign exchange volatility and tariff costs could strain profitability.
- Competition: Amazon and Walmart continue to innovate in e-commerce and membership programs.

Investment Thesis: Hold for Long-Term Value, but Mind the Valuation

Costco's resistance to a stock split is not a distraction but a deliberate choice to prioritize fundamentals over accessibility. Its membership-driven model, global expansion, and operational efficiency justify its premium valuation—provided growth remains intact.

Recommendation:
- Hold: For long-term investors, Costco's recurring revenue streams and pricing power make it a core holding.
- Wait for Pullbacks: Short-term traders may consider buying dips below $900, given the stock's 50-day moving average of $991.
- Monitor Metrics: Keep an eye on **** to assess sustainability.

In conclusion, Costco's $1,000+ stock is less about splits and more about its ability to grow its membership base and sales in a fragmented retail landscape. While risks exist, the company's strategic focus on value creation over price adjustments makes it a compelling hold for patient investors.