Sales remain strong, but membership-fee growth is losing its automatic boost. I expect earnings to rise while the amount investors pay for each dollar of profit falls, producing a twelve-month target of $824.35.
Key points
- $27.71 a share in FY2028 earnings would support today's price at my chosen multiple.
- 7% annual growth is my FY2027, FY2028 membership-fee forecast after the fee-increase benefit ends.
- $824.35 a share is my twelve-month target, despite continued earnings growth.
The call
The market is too optimistic about the premium earnings deserve. Today's price requires 38.9 times my FY2028 earnings forecast. At my chosen 34 times, it instead requires FY2028 earnings of $27.71 a share. September's strong sales support continued growth, not that higher earnings hurdle.
Sales growth stays strong without fuel and currency effects- Q4 FY26 adjusted growth
- September FY27 adjusted growth
Costco September 24 and October 7, 2026 releases; September includes a holiday benefit.
I expect growth without a profit breakthrough. Paid memberships grew 3.8% in the latest quarter, while the fee-increase benefit ended. More premium memberships help, but fuel inflation exaggerates reported sales and expense improvements. Monthly sales and FY2027 earnings disclosures should expose the difference between faster spending and faster recurring profits.
Valuation
| Driver | My estimate |
|---|
| FY2028 revenue | $356.7 billion |
| FY2028 membership-fee growth | 7% |
| FY2028 operating profit as a share of revenue | 3.89% |
| FY2028 earnings per diluted share | $24.25 |
| October 2027 multiple on FY2028 earnings | 34 times |
| Twelve-month target | $824.35 a share |
My model assumes sales growth of 9% in FY2027 and 8% in FY2028, with modest merchandise-profit improvement. The 34-times multiple still rewards predictable renewals, but recognizes slower fee growth and heavier investment. A stronger-growth case reaches $1,080; weaker earnings and a lower multiple reach $660, making the downside more consequential.
The earnings multiple decides the twelve-month outcomeOur October 8, 2026 scenarios: FY28 earnings of $24.25 a share, excluding tariff-refund gains.
Risks
- Premium-membership upgrades and delivery could accelerate profits; watch fee income after removing currency effects and refund gains.
- Falling interest rates could sustain a richer share premium; watch whether the multiple stays high despite slower earnings growth.
- Spending could outrun my cash-generation assumptions; watch the FY2027 warehouse pipeline and planned $7.5 billion investment. FY2026 cash benefited from suppliers financing more inventory, so that improvement may not repeat.
What would change my mind
Two consecutive FY2027 quarters with membership-fee growth above 9% and earnings growth above 15%, excluding tariff-refund gains, would overturn my slower-growth thesis.