Is COST a good stock to buy? We came across a bullish thesis on Costco Wholesale Corporation on LongYield’s Substack by. In this article, we will summarize the bulls’ thesis on COST. Costco Wholesale Corporation’s share was trading at $956.32 as of May 29th. COST’s trailing and forward P/E were 49.73 and 43.29 respectively according to Yahoo Finance.
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Costco Wholesale Corporation, together with its subsidiaries, engages in the operation of membership warehouses in the United States and internationally. COST delivered a strong Q3 FY2026 reinforcing the durability of its membership-driven compounding model, with net sales rising 11.6% to $69.15 billion and total revenue reaching $70.53 billion, marking its strongest 12-week sales performance on record and underscoring persistent demand momentum across geographies.
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Operating income increased 11.3% to $2.815 billion while EPS expanded 15.2% to $4.93, reflecting operating leverage and higher other income driven by growing cash balances. The core investment thesis continues to center on Costco’s membership engine, with $1.373 billion in quarterly membership fees, 82.9 million paid members, and a highly resilient 92.2% US and Canada renewal rate, even after recent fee increases, reinforcing the structural stickiness of its customer base.
E-commerce comparable sales surged 21.5%, highlighting accelerating digital penetration layered onto an already dominant warehouse footprint, while broad-based comparable sales growth of 9.8% (6.6% adjusted) demonstrated consistent strength across regions and categories.
The business continues to benefit from structural advantages including global scale, supplier bargaining power, and Kirkland Signature private label economics, which together reinforce its low-price leadership while sustaining member loyalty. SG&A leverage improved as costs grew slower than sales, and stable merchandise margins reflect Costco’s deliberate strategy of passing value back to members rather than expanding retail margins.
Even in tariff-sensitive and inflationary environments, Costco’s pricing model preserves its relative advantage versus competitors, often strengthening its value gap. With strong cash generation, rising Executive membership mix, and accelerating digital adoption, Costco remains a high-quality compounder with durable earnings visibility, and the combination of steady comp growth, exceptional retention, and scale-driven efficiencies positions it for continued long-term compounding and sustained premium valuation re-rating potential over time.
Previously, we covered a bullish thesis on Costco Wholesale Corporation (COST) by FluentInQuality in March 2025, which highlighted its membership-driven recurring revenue model, cost efficiency, and strong ROIC supported by a high-traffic retail flywheel. COST’s stock price has depreciated by approximately 8.64% since our coverage. LongYield shares a similar view but emphasizes Q3 FY2026 acceleration, e-commerce strength, and membership resilience with operating leverage.
Costco Wholesale Corporation is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 107 hedge fund portfolios held COST at the end of the first quarter which was 106 in the previous quarter. While we acknowledge the risk and potential of COST as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than COST and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
