Costco stock rises on Mizuho upgrade, Top Pick designation

Investing.com -- Costco stock rose around 1% in premarket trading Monday after Mizuho upgraded the retailer to Outperform and added it to its Top Picks list, arguing that recent concerns around slowing membership and comparable sales growth are overstated.

Costco shares have fallen about 20% from recent highs as investors questioned whether Costco’s growth model was losing momentum.

Mizuho analyst David Bellinger pushes back, describing the pullback as driven by execution issues tied to exceptionally strong demand.

“All current issues swirling around shares are the byproduct of simply having too much consumer demand – an incredibly high-quality problem to come across in today’s retail environment,” he wrote.

A key factor is the growing share of new U.S. warehouses classified as “fill-ins,” which divert traffic from already high-volume locations. Mizuho’s proprietary analysis shows that more than half of recent U.S. openings have gone into existing markets, temporarily weighing on headline membership growth.

At the same time, trade-up activity is accelerating, with premium Executive member additions running at roughly 2–3 times the pace of total membership growth, while domestic renewal rates remain above 90% and above the 10-year average.

Bellinger also highlighted easing cost pressures. Wage growth is set to normalize at around 2% annually following a period of elevated investment, which the analyst said is already translating into improved operating leverage.

This, combined with durable high-single-digit (HSD) top-line growth, underpins the upgrade despite difficult sales comparisons over the next several months.

“In our view, +HSD% top-line growth is durable - and coupled with wage/OpEx growth easing - makes for a rare and compelling set-up,” Bellinger said.

He pointed to historical parallels with mid-2017, when Costco shares saw a similar pullback tied to fill-in activity before growth metrics reaccelerated and the stock went on to outperform the broader market. Bellinger believes the current setup is comparable.

Bellinger raised its price target to $1,000 from $950 on the stock, based on a roughly 40x multiple applied to its fiscal 2028 (FY28) earnings estimate of $25 per share.

He also flagged the potential for another special dividend in fiscal 2027, noting Costco’s strong cash position and history of returning capital.

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