Why Costco Stock is a Strategic Buy for 2026

In an era of economic uncertainty and volatile markets, investors are increasingly seeking companies with durable business models and the resilience to weather macroeconomic headwinds. Costco Wholesale (COST) emerges as a compelling candidate for long-term value creation in 2026, driven by its membership-centric profitability, strategic international expansion, and adaptive strategies to counter inflationary pressures. Despite a recent valuation pullback, the stock's fundamentals remain robust, positioning it as a strategic buy for forward-looking investors.

Valuation Pullback: A Mispricing Opportunity

Costco's trailing price-to-earnings (P/E) ratio of 45.84 as of December 2025 appears elevated compared to its 10-year historical average of 38.09, reflecting a 20% premium. However, this metric must be contextualized. The forward P/E ratio of 45.51 suggests that analysts anticipate earnings growth, while the current P/E is a 17% discount to the 12-month average of 55.22. This deviation signals a potential overcorrection in market sentiment, particularly given Costco's consistent operational performance. For instance, Q4 2025 net sales surged 8.0% year-over-year to $84.4 billion, driven by strong membership growth and digital innovation. The pullback creates an entry point for investors who recognize that Costco's earnings trajectory-bolstered by its membership model and global expansion-may outpace current expectations.

Macroeconomic Resilience: The Membership Model's Power

Costco's business model is uniquely insulated from economic downturns. Membership fees, which contributed 66% of net income in fiscal 2024, are projected to account for nearly half of total operating income by 2034. This recurring revenue stream provides stability even during inflationary periods. For example, during the 2024 inflation spike, Costco mitigated cost pressures by stockpiling inventory and negotiating with vendors to absorb price increases. The company's low product margins (averaging 2.5%) ensure that gross profits remain tied to membership growth rather than commodity swings, a structural advantage in volatile markets.

Strategic International Expansion: Fueling Long-Term Growth

Costco's global footprint is a cornerstone of its long-term value creation. By the end of 2025, the company operated 914 warehouses across 14 countries, including 28 new openings in fiscal 2025. International markets, particularly Canada and other regions, delivered 6.3% and 8.6% comparable sales growth, respectively. While U.S. market saturation poses challenges, Costco's expansion into emerging economies-such as China and the United Kingdom-offers untapped potential. Pierre Riel, executive vice president of international operations, emphasizes the company's philosophy of "localizing value," adapting its model to meet regional needs while maintaining its core focus on member satisfaction.

Digital Innovation: A New Growth Engine

E-commerce is rapidly becoming a second pillar of Costco's growth. In the first 36 weeks of fiscal 2024, online sales rose 14.9%, driven by partnerships like Uber Eats and enhanced digital platforms. This trend aligns with broader consumer shifts toward convenience and omnichannel retailing. By 2026, Costco's digital initiatives are expected to further diversify its revenue streams, reducing reliance on physical store growth and enhancing customer retention.

Conclusion: A Strategic Buy for 2026

Costco's combination of a resilient membership model, disciplined international expansion, and digital innovation positions it as a strategic buy for 2026. While the current valuation pullback may reflect short-term market skepticism, the company's long-term fundamentals-strong cash flow, recurring revenue, and adaptive leadership-suggest that the stock is undervalued relative to its growth potential. Investors who prioritize macroeconomic resilience and sustainable value creation will find Costco's stock a compelling addition to their portfolios.