Costco's December Sales Pop: A Tactical Re-rating or a Mispricing?

The immediate driver is clear. On Thursday, shares of Costco rose more than 3% after the company released its December sales figures. The core metric, adjusted U.S. comparable sales, grew 6.3%. That's a solid beat against expectations and follows a pattern of consistent momentum, with comparable sales in October and November also coming in above estimates. The digital sales surge is the standout lever, with digitally enabled sales surging 18.3%. This sustained strength in e-commerce highlights a key growth channel that may have been underappreciated by the market.

Viewed as a catalyst, this report is a genuine positive. It confirms the resilience of Costco's membership model and its appeal to value-conscious shoppers, providing a tangible data point that justifies the price pop. The stock's move up to 5.6% intraday suggests the market is pricing in this confirmation of steady demand. Yet, the magnitude of the gain also hints at a correction of prior mispricing. After a year where the stock fell 4.8% against an industry that rose, the December beat likely reset some of the negative sentiment that had built. The event itself is the catalyst; the market's reaction is the re-rating.

Financial Impact: Quality of Growth and Margin Levers

The December beat is more than a seasonal pop; it's a continuation of a high-quality earnings trajectory. The growth is compounding, not one-off. On a two-year stacked basis, the 6.3% U.S. comparable sales growth now exceeds 16%, the strongest level in nearly a year. This builds directly on a solid first quarter of fiscal 2026, where net income rose 11.3% to $2.0 billion on 8.2% sales growth. The quality here is in the consistency and the underlying drivers.

The standout lever is digital. The digitally-enabled sales surge of 20.5% in Q1 and the 18.3% growth in December point to a high-margin, scalable channel. E-commerce typically carries better unit economics than physical retail, so this isn't just volume-it's a potential profit amplifier. As this segment grows, it can gradually improve the company's overall EBITDA margin over time, providing a durable lift to earnings power beyond the top-line comps.

This quality growth is what analysts are betting on. UBS maintained its $1,205 price target, citing consistent regional growth, while Mizho upgraded to Buy, pointing to easing cost pressures. The setup is clear: the market is rewarding a company that is not only selling more but selling more efficiently. The December report confirms the trend is intact, making the recent price re-rating a rational adjustment rather than a speculative surge.

Valuation and Analyst Reaction: Is the Pop Justified?

The stock's pop is a direct reaction to the sales beat, but the valuation gap suggests the market is still catching up. Shares are trading near $915, a significant move from the $882.58 price used in the average analyst price target of $1,052.93. That average target implies nearly 20% upside, indicating analysts see further re-rating potential even after the recent gains. The setup is a classic event-driven opportunity: the catalyst confirmed the trend, but the consensus still points to a higher plateau.

UBS's maintained $1,205 price target is the standout high-stakes call, providing a specific benchmark for the stock to reach. Their rationale-consistent regional growth and strong results-directly ties back to the December report's breadth. Other firms like Mizuho and Jefferies have also recently reaffirmed or raised targets, citing the same momentum. This isn't a scattered set of opinions; it's a cluster of high-conviction views that the December beat validates and extends.

Yet, the range of targets reveals underlying uncertainty. The lowest forecast sits at $769, a stark reminder of the risks. Analysts like Roth MKM have downgraded to Sell, and Guggenheim maintains Neutral, citing concerns over membership renewal rates and softening metrics. This divergence means the stock's path now hinges on execution against these conflicting narratives. The December pop has narrowed the gap, but the analyst consensus still sees room for the stock to climb further if Costco can keep delivering on its growth runway.

The bottom line is that the immediate catalyst has been priced in, but the forward view remains open. With the average target implying 19% upside and a clear high-water mark set by UBS at $1,205, the event has created a tactical re-rating. The next move depends on whether the company can sustain the quality of growth that justifies those lofty targets.

Catalysts and Risks: What to Watch Next

The December sales beat is a confirmed positive, but the stock's next move hinges on two near-term events. First, the company will report its Q2 fiscal 2026 earnings in late February. That report will provide the first full-quarter look at how the December comp growth translates into bottom-line results. Investors will scrutinize whether the strong digital sales trend, which surged 18.3% last month, is accelerating or stabilizing. Any commentary on digital penetration and its margin impact will be critical for validating the growth quality narrative.

The primary risk is sustainability. The 6.3% U.S. comparable sales growth is robust, but it must hold up amid potential economic softening. If consumer spending weakens, it could pressure the core membership model, where renewal rates are a key long-term metric. Analysts like Roth MKM have downgraded to Sell citing this exact concern, highlighting a vulnerability that the recent pop may have overlooked. The upcoming earnings call is where management will address these macro pressures and membership trends.

In short, the catalyst is set. The February report will be the first real test of whether the December momentum is a sustainable trend or a seasonal peak. The risk is that economic headwinds could challenge the growth trajectory just as the stock re-rates. Watch for management's guidance on comps and digital, and listen for any shift in tone on the economic outlook.