Costco Finally Breaks Out: Is There Still Time to Buy?

A sleeping giant might finally be awaking after spending nearly a full year repeatedly hitting the snooze button. Shares of Costco Wholesale Corp. (NASDAQ: COST) began 2026 with a quick 10% gain on the back of stellar December sales data and technical signals pointing toward a bullish breakout. Is there still time to buy this retail favorite? If recent events are any indication, COST investors could be in for an exciting year.

Impressive Sales Growth Getting Harder to Ignore

After spending most of 2025 in a frustrating holding pattern, the market is beginning to reward Costco’s impressive sales data once again. The company released its December sales figures last week, and the stock immediately jumped 3% on the news.

For the five weeks ending Jan. 4, Costco generated $29.86 billion in sales, up 8.5% year-over-year (YOY). Comps rose 6% YOY in the United States, while Canadian comps were 8.4% and international comps were 10.6%. 

One particularly encouraging data point was the growth of digital-enabled sales, which surged nearly 19% YOY and may finally kill the narrative that Costco is lagging the broader retail sector in its e-commerce efforts.

This 19% growth figure comes on the tail of November’s 16% digital sales expansion, and the results are showing up in larger tickets (up 4.2% on average in December) and increased customer traffic.

Not only are these digital initiatives driving customers to visit more frequently, but they’re also spending more when they shop.

Fundamental and Technical Tailwinds Taking Shape

Strong earnings have always been Costco’s driving force, and its revenue and membership retention are primary reasons why investors are willing to pay 50 times earnings for a big box retailer. Costco’s fiscal 2025 year ended in August, and it was in its report for fiscal 2025 that management laid the groundwork for the current breakout.

Total sales for fiscal 2025 were approximately $269 billion, an increase of more than 8% from 2024. Net income exceeded $8 billion, and membership retention rates in the U.S. and Canada once again exceeded 90% (though some slippage is occurring in this area).

The company started fiscal 2026 strong, reporting more than $66 billion in sales during its Q1 2026 conference call on Dec. 11.

Management also has bold expansion initiatives in 2026, planning to open 30 new warehouses annually over the next few years to boost its international footprint.

Technical patterns are lining up in the stock’s favor after six months in the doldrums. COST shares started 2025 strong, building on its previous 40% gain in 2024.

The stock reached an all-time high of $1,076 in February, but tumbled in April with the rest of the market when President Trump’s trade war escalated.

However, unlike the broader market, COST shares didn’t recover when the tariffs were canceled. The stock lost nearly 20% of its value in the second half of the year, reaching a multi-year low of $850 on Dec. 22. This long downtrend was finally broken in the last two weeks, and now the stock appears set up for more gains.

The 50-day simple moving average (SMA) fell below the 200-day SMA in August 2025, creating a Death Cross pattern that saw the 50-day SMA turn into a heavy resistance area. Multiple attempts to reclaim this level were rebuffed by bearish momentum, but now the buyers are back in control, and the share price has broken through the 50-day SMA with force. A bullish crossover on the moving average convergence/divergence (MACD) indicator confirms the breakout and puts the 200-day SMA back on the radar as the next crucial level to watch. If COST shares can reclaim the 200-day SMA with the same vigor as the 50-day, this rally could have some serious momentum behind it.

Valuation Concerns Remain Despite Rangebound Trading 

Investors are feeling better about COST shares than they have in quite some time. The fundamental picture remains promising, and the technical setups are also increasingly optimistic. But if there’s one central area of concern for new shareholders, it's the valuation. 

COST spent most of 2025 trading in a volatile downward range, but the decline failed to address the company’s pricey valuation compared to the rest of its retail peers.

The stock still trades at 50 times earnings and 14 times book value, with the average retail sector stock trading at just 24 times earnings. Investors typically don’t mind paying a premium for Costco’s successful membership model, but a 50 Price-to-Earnings (P/E) ratio is more than 30% higher than the company’s 10-year average. As long as the consumer remains resilient, Costco’s rebound will have legs. However, if cracks in the economy begin to appear and sales numbers dip, the stock’s valuation could cause another stampede to the exits.

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