Where Will Costco Stock Be in 3 Years?

Costco Wholesale Corporation (NASDAQ: COST) has been a reliable investment for many years, consistently delivering strong financial performance and rewarding shareholders with dividend increases. As we look ahead to the next three years, let's explore where Costco's stock might be headed.

Costco's stock has rallied nearly 80% over the past three years, significantly outperforming the S&P 500's 30% gain. This impressive performance can be attributed to the company's consistent growth and resilience against economic headwinds. As Costco continues to grow its comparable-store sales, gain new members, maintain high renewal rates, and open new warehouses, its core business remains healthy.



In fiscal 2025, Costco plans to open 29 new stores (including three relocations), with 12 new stores for the U.S. market. This expansion strategy is expected to contribute to its revenue growth over the next three years. Analysts expect Costco's revenue to grow at a compound annual growth rate (CAGR) of 7% from fiscal 2024 to fiscal 2027, driven by new store openings and increased membership fees.

Costco's recent membership fee increase, the first in seven years, is expected to bolster its financial performance over the next three years. This hike will help offset inflation, logistics costs, and wage increases, contributing to the company's stable outlook. Analysts forecast a CAGR of 7% for Costco's revenue and 10% for its earnings per share (EPS) from fiscal 2024 to fiscal 2027. This consistent growth suggests that Costco's stock will remain an attractive investment in the coming years.

However, Costco's stock is currently trading at a rich valuation of 56 times this year's earnings. While the bulls argue that Costco deserves its premium valuation due to its wide moat and steady growth, the bears contend that the stock's price reflects a flight to safe-haven investments and market optimism about lower interest rates. As a result, investors should be cautious about buying Costco's stock at its current price and consider accumulating shares gradually.

In conclusion, Costco's strong financial performance and growth prospects make it an attractive long-term investment. However, its rich valuation may limit its upside potential in the near term. Investors should monitor the company's progress and consider buying shares gradually to take advantage of any potential market downturns over the next three years.