Costco (NASDAQ: COST) stock was a rare laggard in the Q1 earnings season. While many retailers posted standout results, Costco missed adjusted earnings per share by a slight margin. The reported $4.93 per share fell short of estimates of $4.97.
The stock has fallen roughly 14.7% over the two months ending July 19. For long-time holders, that drop raises a fair question: is this a warning sign, or a buying opportunity in disguise?
The slide didn’t come out of nowhere. Costco’s June sales report showed comparable sales growth of 8.8%, a clear step down from May’s 12.5% pace. That deceleration, paired with the earnings miss, has investors reassessing what they’re paying for.
Wall Street still sees upside. The consensus price target of $1,059.07 implies about 12.56% upside from current levels. Add in Costco’s modest 0.62% dividend yield, and the forecasted total return still falls well short of the stock’s three-year average return of just over 25%. That gap suggests the easy money in Costco may already be behind investors, at least for now.
In this article, I break down the case for caution, the fundamentals that still support the stock, what the charts are saying, and what it all means for anyone watching Costco from the sidelines.
Slowing Growth Tests a Premium Valuation
Costco has long commanded a premium multiple, and that premium depends on consistent, strong growth. The June deceleration to 8.8% comparable sales, down sharply from May’s 12.5%, chips away at that story. Investors pay up for Costco because its growth felt dependable. A slowdown, even a modest one, invites scrutiny of the price they’re paying.
Layer on the earnings miss, and the market’s reaction starts to make sense. Costco is only expected to grow earnings by about 10% over the next 12 months. That’s a solid number for most retailers. But it’s not the kind of growth that justifies Costco’s historical valuation premium.
Then there’s the stock split question. Costco has repeatedly said it has no plans to split its shares, despite trading well above $900. A high per-share price can discourage some retail investors from starting or adding to positions, even though it has no effect on the underlying value of the business. Combined with slower growth and a rich valuation, that stance could keep some potential buyers on the sidelines a while longer.
Free Cash Flow and a Resilient Customer Base
Costco’s underlying business is not showing cracks. Free cash flow for the first 36 weeks of fiscal 2026 came in around $6.9 billion, up roughly 16% from a year earlier. By that measure, Costco still looks undervalued relative to where it trades today. Traditional discounted cash flow models built on that free cash flow growth point to fair value estimates above the current share price, with meaningful upside built in even under conservative assumptions.
Costco’s membership model adds another layer of durability. Subscription fees give the company a recurring revenue stream that isn’t tied to daily foot traffic or discretionary spending swings. Its customer base also skews toward higher-income households, a group that has generally weathered sticky inflation better than the average shopper. That combination gives Costco a cushion most retailers don’t have.
It’s also important to remember that the slip in global sales in June 2026 is coming off a high year-over-year comp. In June 2025, global comparable sales were up around 5.8%. That means that the 8.8% recorded in June 2026 is a year-over-year acceleration.
What the Charts Are Signaling
The technical picture leans cautious in the near term. COST shares recently broke below their 150-day moving average, currently near $969, after topping out above $1,080 in May. The stock has struggled to reclaim that level since.
The MACD indicator sits in negative territory, with both the MACD line and signal line below zero. That points to lingering downward momentum rather than a clean reversal. Volume on down days has also picked up. None of this guarantees further declines. But it suggests the stock may need more time, or a lower price, before buyers regain control.
The Bottom Line for Investors
Costco looks overextended, not overvalued. That’s an important distinction. The business fundamentals remain intact, but the stock ran ahead of its growth rate. Investors may want to wait for a better entry point rather than chase a rebound. For now, COST earns a spot on the watchlist. A meaningful pullback could make it an attractive long-term buy.
