What changed
$COST — AVOID 📊 | 6 MONTHS THESIS
🧭 Conviction: HIGH
🎯 FQ3 FY2026 (ends May) | reported May 28 | Rev $70.5B | EPS $4.93 vs $4.98 🔴 | Margin 4.0%
💡 The market expects sustained premium multiples and robust membership growth; however, with operating margins at 4.0%, an earnings miss, and peer averages near 15x, the risk of a sharp de-rating is high. Consensus underestimates the likelihood of multiple compression as growth slows.
🏢 Business Quality: 8 — Sticky membership model and fortress balance sheet with $13.3B net cash, but net margin of 3.1% leaves little room for error and limits earnings growth potential./10
📊 Valuation: rich — 48.3x trailing vs historical median 30.2x and peer band 8.6x-23.6x; DCF implies -24% FCF growth; price targets: base $334.86 (14.8x), bear...
🔮 Catalyst: Next quarterly earnings report or membership update
⚖️ Avoid Costco at current levels: with 48.3x trailing P/E at the top of its historical range, only 16.9% upside to the bull case versus 64.8% d