Costco Stock Is Flat as the Year Comes to a Close. Is That a Signal to Buy, or a Signal to Sell?

Costco Wholesale (NASDAQ: COST) has always been that reliable stock that can beat the market under almost any circumstances. It has a distinctive membership model and rock-bottom prices, and it consistently adds revenue and profits.

However, that's changing in 2025. With just a month-and-a-half left in the year, Costco stock has been roughly flat year to date, while the S&P 500 is up almost 16%. Is that a sign to stay away, or a flashing buy-on-the-dip signal?

Image source: Getty Images.

Growing, and growing, and growing

Costco has a unique retail model that requires membership for customers to shop in its warehouses. It's worthwhile for its 81 million members, since they get access to some of the lowest prices. If you shop there enough, you save a lot more than the cost of the annual fee, which is $65 annually, or $130 for a premium "executive membership."

More and more people see the value proposition and are signing up. Paid membership increased 6.3% year over year in the 2025 fiscal fourth quarter (ended Aug. 31), with 145 million total cardholders. Executive members increased 9.3% to 38.7 million. They accounted for 47.7% of paid members and 74.2% of total sales.

Costco increased its membership fee last year, and membership fee income is outpacing both membership growth and total sales growth. Total sales increased 8% over last year, with a 6.4% increase in adjusted comparable sales. Fee income increased 14%.

Changing and expanding

Although Costco's model hasn't changed fundamentally since it got started, it's always changing in different ways, as in any vibrant and dynamic company.

One thing that's making a big impact today is e-commerce, or what the company now calls "digitally enabled sales." It's an apt description, since it encompasses various services along some digital channels, like order-online pickups in stores, and online sales delivered by companies like Instacart (the more familiar name of Maplebear).

Costco isn't trying to be Amazon; it's finding its own niche in e-commerce that works, and it's gaining momentum. Digitally enabled sales increased 13.6% year over year in the fiscal fourth quarter and 16.6% in the month of October. Costco recently started offering signups online, and it's gearing more of its marketing toward digital channels, too.

It's had other major changes recently, such as extended hours for executive members. It also announced a monthly $10 credit for Instacart deliveries of at least $150, and management said it has seen "meaningful" upgrades from basic to executive memberships.

Executive members are a huge growth driver for Costco, and offering more perks for this constituency is an important growth lever.

Why isn't Costco stock moving?

Costco has been reporting phenomenal performance and innovative strategizing that's yielding results. Why isn't its stock moving?

It doesn't look like this is a phenomenon tied to Costco. Other stocks have gone through a similar trajectory lately. Look no further than fan-favorite Palantir Technologies, which issued a blowout third-quarter earnings report, after which its stock fell anyway.

This is more likely a symptom of an overstretched market. The S&P 500 has been hitting new records, and all of a sudden it's taking a step backward. It's getting more and more expensive, even as inflation persists and the economy is still in flux.

Costco stock has a premium price tag, and there's only so much higher it can go at this price. As of this writing, it trades at a price-to-earnings (P/E) ratio of 51, which is already moving lower, and that's still higher than its three-year average.

COST PE Ratio data by YCharts.

Costco shares could finally be correcting from a price that's simply been too high. I'm not sure that they're done yet, so while I think Costco is an excellent stock to keep in your portfolio, you might want to wait for the valuation to get lower before deciding it's time to buy.

You could also use a dollar-cost averaging strategy to build up a position and benefit from better pricing.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Palantir Technologies. The Motley Fool recommends Instacart. The Motley Fool has a disclosure policy.