By Teresa Rivas

Unlike its famed hot dogs, Costco stock is rarely cheap. Yet at least one analyst thinks it is entering bargain territory.

Costco Wholesale has been a powerhouse since the pandemic, rising nearly 140% over the past five years. It handily outperformed the S&P 500 as well as peers tracked in the State Street SPDR S&P Retail ETF and the Consumer Staples Select Sector SPDR fund.

That reflects the fact Costco and its wholesale club peers are becoming increasingly popular at the expense of other retailers thanks to a strong value proposition and curated merchandise.

Yet 2025 has been an outlier for the stock. Barron's warned last year it was getting too pricey, and indeed the shares have lagged so far in 2025, hovering around the break-even point year to date. The stock is down some 15% from its highs in February, compared with double-digit gains for the broader market.

However, with difficult comparisons behind it and a more reasonable valuation, Oppenheimer analyst Rupesh Parikh argues it is time to give Costco another look, given its "superior value proposition, our expectations for continued share gains...and positioning to a relatively higher affluent customer."

That led Parikh to name Costco as one of his top picks on Monday, alongside Ulta Beauty and Walmart. Although he lowered his price target to $1,050 from $1,130, that still implies some 15% upside from the stock's current levels around $915.

He thinks any near-term volatility related to concerns about food stamp disruption from the government shutdown is a buying opportunity, given Costco will likely be less impacted than other grocery-oriented retailers.

At the same time, he thinks that Costco is well positioned to capture more sales this holiday season in discretionary categories "through an attractive assortment of Apple/CE products, gift cards, strengthening branded apparel selection, and a strong appliance value proposition."

Then there is always the potential for a stock split at some point in the future. It has been a quarter-century since Costco's last split, even as peers Walmart, O'Reilly Automotive, Deckers Outdoors, Chipotle Mexican Grill, and Netflix have announced stock splits since the start of 2024. Parikh believes that any announcement related to a split, or a special dividend, could also boost the shares.

Regardless of when that might happen, investors buying now are getting a good deal. Trading around 45 times next year's earnings may not seem cheap, but it is certainly more palatable than a multiple of more than 50 times, where the stock has spent most of the year, and as Parikh notes, the shares are now more in line with historical averages.

Sounds like a good time to stock up.

Write to Teresa Rivas at teresa.rivas@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

November 03, 2025 14:09 ET (19:09 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.