Analyst Says Costco Stock Overvalued as Growth Decelerates

Key Facts

Amid the continued strength of US retail stocks, a Seeking Alpha analyst argues that Costco (COST) is overvalued. The stock trades at a trailing P/E of 50x, with decelerating sales and earnings growth below 10% by 2027. The analyst estimates fair value between $450 and $565, compared to the June 29 close of $946.68, suggesting significant downside potential.

The analysis comes as US personal spending rose 0.7% in May (per market data), beating forecasts, while durable goods orders fell 4.5% last month. Despite resilient consumer spending, the analyst warns Costco is vulnerable to weaker spending due to a high PEG ratio of 4-6x. Per market data, the stock fell from an intraday high of $969.86 on June 29.

COST currently trades at $946.68 (close June 29), roughly 70% above the upper end of the analyst's fair value range. Investors watch for next quarter's results in July to gauge growth momentum, along with inflation and labor market data that could impact consumer spending. If growth continues to decelerate, the stock may face further pressure toward lower valuation levels.