Better Stock to Buy Right Now: Amazon vs. Costco
Key Points
Costco has delivered a much better stock performance than Amazon so far in 2026.
However, Amazon's valuation looks like a bargain in comparison to Costco's premium price tag.
Amazon also has a huge AI tailwind at its back.
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If momentum were the only factor to consider, choosing between stocks would be a piece of cake. For example, shares of Costco Wholesale (NASDAQ: COST) are up by a double-digit percentage so far this year, while Amazon's (NASDAQ: AMZN) stock is down by a double-digit percentage. Based on momentum, Costco would be the hands-down winner.
However, savvy investors know that there's much more to consider when buying a stock than momentum alone. Which is the better stock to buy right now -- Amazon or Costco? Here's how the two retail stocks compare.
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Image source: Amazon.
The case for Amazon
Yes, Amazon's stock performance has been dismal in 2026. However, it isn't because the company is struggling. Amazon reported net sales of $213.4 billion in the fourth quarter of 2025, up a strong 14% year over year. Its earnings rose 6% to $21.2 billion.
What's behind Amazon's pullback? Investors experienced sticker shock after management announced plans to spend a stunning $200 billion in capital expenditures this year, with much of the money going toward artificial intelligence (AI) infrastructure for Amazon Web Services (AWS), the company's cloud services unit.
Amazon CEO Andy Jassy strongly believes the company's AI investments will pay off. He noted in the Q4 earnings call that AWS is "monetizing capacity as fast as we can install it." If you agree with Jassy, the stock will be a great pick right now. Amazon's price-to-earnings ratio is near its lowest level ever.
The case for Costco
Costco remains one of the best consumer defensive stocks around. Whenever inflation rises or the economy stumbles, investors can count on Costco's business holding up quite well.
That business performed nicely in the latest quarter. Costco announced net sales increased 9.1% year over year to $68.2 billion in its fiscal 2026 second quarter. Net income jumped 13.8% to $2.04 billion.
While tariffs are causing prices on many products to increase, Costco CEO Ron Vachris said in the company's Q2 earnings call, "At Costco, we always want to be the first to lower prices and the last to raise them." This philosophy is important to Costco's renewal rate in the U.S. and Canada, which has remained high at 92.1% even after raising membership fees. In an uncertain market like the one we have now, such pricing power is a big plus for this stock.
The verdict
I think that both Amazon and Costco are solid picks for long-term investors. However, there are two reasons why I view Amazon as the better pick.
First, Costco is arguably priced for perfection with its forward price-to-earnings ratio of 48. Amazon looks downright cheap compared to its shares, which trade at 26 times forward earnings.
Second, while both Amazon and Costco are retail stocks, Amazon is also an AI stock. The company should have tremendous growth prospects, with agentic AI serving as a major tailwind.
Should you buy stock in Amazon right now?
Before you buy stock in Amazon, consider this:
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Keith Speights has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Costco Wholesale. The Motley Fool has a disclosure policy.
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