Why certain analysts believe that 'defensive' investors may help push Costco shares closer to their previous highs

Main Highlights

• Costco's stock climbed on Friday after the company reported quarterly earnings that surpassed market expectations.

• Experts suggest that if Costco maintains its current momentum, its shares could see further growth throughout the year.

Costco Wholesale (COST) delivered earnings that exceeded projections, resulting in a boost for its stock price. However, investors are now questioning the future direction of the stock, which has remained relatively flat over the past year.

On Thursday, the retail giant announced earnings of $4.58 per share for its fiscal second quarter, with revenue reaching $69.6 billion. These figures outperformed analyst forecasts, which anticipated $4.51 per share and $69.1 billion in sales, according to Visible Alpha.

During a day when the broader market was subdued, Costco shares rose by 1%. Despite consistently strong financial results, the stock has dipped slightly over the past year. Still, after a 15% rally earlier this year, some analysts believe there is potential for additional gains, especially as investors continue to favor defensive, consumer-oriented stocks.

Why Investors Should Pay Attention

Costco has built a loyal customer base, and its stock currently trades about 8% below its all-time high of nearly $1,077 set in early 2025. The average analyst price target remains roughly $40 below that peak.

According to JPMorgan, Costco is outpacing its competitors in both sales and margin growth. The firm noted that the key question for investors is not whether to buy Costco shares, but when. JPMorgan maintained its "overweight" rating and increased its price target by $10 to $1,060, which aligns with the consensus estimate—about 9% above the previous day's closing price.

Analysts at William Blair view Costco as a reliable choice for investors seeking stability in an uncertain consumer market. They also noted that the company is in a strong position to potentially issue a special dividend or expand its share buyback program, both of which could further support the stock price.

Another factor to watch is the unresolved issue of tariff refunds. Costco was among several companies that filed a lawsuit against the Trump administration over tariffs last year, seeking reimbursement if the tariffs were overturned—a decision that was made last month.

During the recent earnings call, CEO Ron Vachris stated that it remains unclear if or when Costco will receive a tariff refund. If the company does secure a refund, it intends to pass the savings on to customers through reduced prices, according to a transcript from AlphaSense.