Costco Wholesale Corporation (NASDAQ:COST, XETRA:CTO) has earned a repeat 'Buy' rating from UBS analysts ahead of its fiscal first quarter earnings report due after markets close on Thursday.
The company is expected to maintain its momentum through the holiday season, with UBS analysts highlighting steady sales growth, market share gains, and emerging opportunities as key strengths for the membership-based retailer.
The analysts have a 12-month price target of $1,205, representing a roughly 34% upside from Costco’s last close.
Analysts see the company’s recent performance demonstrating the strength of its business model. “The retailer has been generating 6%+ comps consistently as of late, averaged ~6.5% in the past six months. Importantly, more than half of these gains were driven by traffic,” they wrote.
UBS expects these trends to continue through the remainder of the holiday shopping period, supported by initiatives such as its “12 Days of Precious Metals” campaign and reruns of popular giftable items like discounted Uber gift cards.
Costco’s operating margins have also been robust. The UBS team noted that the retailer has seen operating margin expansion on a year-over-year basis for nine consecutive quarters, with quarterly margins reaching their highest levels in over 30 years last year.
“We continue to believe it can sustain this performance, due to the significant growth in its sales base as well as multiple levers it has at its disposal,” the analysts wrote.
For fiscal first quarter 2026, UBS expects Costco’s top-line momentum to remain strong. The firm forecasts net sales growth of 8.2% and a core comparable sales increase of 6.4%, slightly above consensus.
Membership fee income growth is expected to remain elevated, benefiting from a prior membership fee increase, which UBS estimates contributed roughly 7% to growth in the previous quarter.
UBS also highlighted membership trends, noting that Costco’s worldwide renewal rates have moderated slightly following a decade of consistent improvement.
“The retailer has been facing some pressure from lower renewal rates of its newer members who signed up through digital channels. This trend will likely continue in Q1,” UBS wrote.
Turning to profitability, UBS projects modest gross margin expansion to 11.32% of net sales, supported by robust sales growth, higher Kirkland brand penetration, and fresh goods improvements.
SG&A expenses are expected to remain stable at 9.4% of revenue, reflecting both wage investments and productivity gains. UBS forecasts EPS of $4.39 for the quarter, above the consensus of $4.28.
While some investors have questioned whether Costco’s premium valuation could face headwinds, UBS highlighted that the company’s strong fundamentals and market position.
“We think Costco has a favorable setup,” the firm wrote, pointing to ongoing market share gains and operational levers that could support continued margin expansion.