Costco Stock Analysis: Why COST Shares are a Strong Buy for Long-Term Investors

COST stock is a recession-resistant asset that you can buy and hold for years and even decades

Source: ESB Professional /

Where does Costco Wholesale’s (NASDAQ:COST) value really come from? It doesn’t come from price-to-earnings (P/E) ratios or other traditional metrics. Rather, it comes from the loyalty of Costco’s members. Today’s Costco stock analysis will reveal a valuable truth: as long as there’s strong customer loyalty and resilience among the consumers, Costco shares will provide consistent value.

It’s that loyalty, by the way, that makes Costco stock a recession-resistant asset. Sure, Costco will have to deal with issues along the way, such as unauthorized membership card sharing. Yet, there are ways to address Costco’s challenges and the bull case for investors remains intact in 2024.

Dealing With Costco’s Costly Problem

Card borrowing is a double-edged issue for Costco. It’s not all bad, as non-members who borrow cards to shop at Costco are still paying customers. On the other hand, it’s understandable that Costco wants to crack down on unauthorized membership card sharing.

Costco relaxed its card-borrowing rules during the peak of the Covid-19 pandemic. More recently, however, the company wants to curb the common practice of non-members piggybacking on other people’s memberships. After all, Costco reportedly raked in roughly $4.6 billion in membership fees in just a year.

Rest assured, Costco is taking action on this matter. Charles Passy of MarketWatch observed that Costco is now “testing a membership-card scanning system at entrances of select stores instead of just letting shoppers flash the card to an employee standing guard.” Furthermore, Costco is currently “requiring those who opt for self-checkout to show proof of membership at the time of purchase.”

These measures are necessary even if they may be slightly inconvenient for Costco’s customers. Understandably, Costco loosened up its card-borrowing restrictions during the pandemic, but now it’s time for the company to do what’s needed to boost its membership revenue.

A Strong Consumer Is Good for COST Stock

Good news for Costco stockholders: the U.S. consumer is strong and resilient, and there’s data to prove this. Specifically, retail sales increased 0.6% year over year in December, beating the economists’ estimate of 0.4% and November’s increase of 0.3%.

This is positive for America’s retail sector generally, and certainly bodes well for Costco. Indeed, amid this retail-bullish backdrop, one market commentator emphasized Costco’s prime position as a U.S. retailer with an ultra-loyal customer base.

Wall Street Alliance Group partner Aadil Zaman contended that, given Costco’s loyal membership base and “recession resilient” low-cost model, the company’s “customers aren’t going anywhere.” I concur 100% regarding the recession resilience. For example, customers flocked to Costco’s locations to stock up on essential goods during the Covid-19 pandemic.

Furthermore, Zaman asserted that Costco proves “a brick-and-mortar retailer can not only survive but also thrive” despite e-commerce trends. That’s actually a great point, as sometimes investors over-focus on e-commerce businesses. It’s fine to invest in e-commerce companies, but Costco and its loyal customers are proof positive that physical stores are here to say.

Costco Stock Analysis: Membership Pays in Multiple Ways

Being a Costco investor pays you every quarter in the form of dividend distributions. Moreover, a Costco stock analysis shows that it has gained significant value over the years. In other words, history indicates that it pays to be a Costco shareholder.

That’s a trend that probably won’t end anytime soon. Customer loyalty and the resiliency of the U.S. consumer should benefit Costco for many quarters to come. Besides, Costco is finding ways to address the card-sharing issue in 2024. Hence, you’re invited to become a member of the COST stock investors club – no card needed, and you’ll enjoy the benefits for many years.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Biedex Markets, and (of course) He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.