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When consumers are looking for value, a trip to Costco Wholesale Company. NASDAQ: VALUE IThis is often on the agenda. But as investors looked for gains in December, COST stock fell out of favor. Costco shares are down about 2.2% for the month through Dec. 27. However, shares have fallen more than 6% since hitting a high of $1,007 ahead of the company’s December 12 earnings report.

Trading at forward earnings of over 52x and a return on equity of around 33%, investors may be right to believe it’s time to take some profits off the table. Even with the December decline, COST stock is still up about 42% in 2024, outperforming the S&P 500 and other retail stocks.

But with recent inflation figures showing consumers will continue to face higher prices in 2025, is there more upside potential for Costco stock? Let’s look at the reasons why COST continues to be popular.

Costco wholesale today

EXPENSES

Costco wholesale

$923.28 -16.42 (-1.75%)

(As of 09:51 ET)

52 week range

$640.51

▼

US$1008.25

Dividend yield

0.50%

P/E ratio

54.21

Target price

$1011.74

In September 2024, Costco increased its membership fee for the first time in seven years—about two years behind its previous price increase schedule.

Historically, Costco has had a retention rate of over 90% when it increases its membership fee. However, there have been legitimate concerns about this increase as consumers look to cut costs wherever they can.

So far, these concerns appear to be unfounded, as the company does not see any significant loss of membership. In fact, it reported a 7.75% increase in membership for the quarter. In addition, Costco expects to receive the majority of the financial benefits from this increase, which will go directly to the company’s bottom line in 2025 and 2026.

Costco opened 17 new brick-and-mortar stores last year, bringing its total to about 900 stores in 14 countries. 80% of these stores are in North America, indicating potential for future growth.

But the company’s expansion is not only about its physical presence. It is also making progress in the e-commerce space. In the most recent quarter, the company reported a 21% increase in its e-commerce business, helped by a 32% increase in downloads of the company’s mobile app.

And growing its e-commerce business will also create opportunities for Costco to target its customers in new ways through the advertising network the company is building.

The common denominator of almost every successful business is a strong balance sheet. In addition to the company’s revenue and profit growth, Costco reported a 10% year-to-date increase in its cash balance, which now stands at nearly $11 billion.

TThe company has net cash relative to debt and expects to pay a special dividend in early 2026. And keep in mind that the company already has a 21-year streak of dividend increases, in addition to the $4 billion share repurchase program Costco announced in January 2023 with two years remaining.

With Costco stock trading around $1,000 per share, analysts asked company management about the possibility that the company’s board of directors could authorize a stock split in 2025. The retailer has split its shares three times before, but not since 2000.

While a stock split does not change a company’s valuation, it can make a stock more attractive and affordable to investors who prefer to buy shares outright. In fact, one of the motivations that Walmart Inc. New York Stock Exchange: WMT When it split its shares in January 2024, the option for Walmart employees to buy full shares was mentioned.