Costco (NASDAQ:COST) shares gained about 1% in premarket trading on Monday after Mizuho raised its rating on the warehouse retailer to Outperform and named it a Top Pick, saying investor worries about slowing membership and comparable sales growth have been overdone.
The stock has retreated roughly 20% from recent peaks as markets questioned whether Costco’s long-running growth engine was beginning to cool.
Mizuho analyst David Bellinger disagreed, arguing that the pullback reflects short-term execution dynamics linked to unusually strong demand rather than structural weakness.
“All current issues swirling around shares are the byproduct of simply having too much consumer demand – an incredibly high-quality problem to come across in today’s retail environment,” he wrote.
Bellinger pointed to the increasing number of new U.S. warehouse openings classified as “fill-ins,” which are built in existing markets and tend to redistribute traffic away from already busy locations. According to Mizuho’s proprietary work, more than half of recent U.S. openings have been in established markets, temporarily weighing on reported membership growth figures.
At the same time, customer “trade-up” behavior is accelerating. Additions of premium Executive members are running at roughly two to three times the pace of overall membership growth, while U.S. renewal rates remain above 90% and comfortably above the long-term average.
Cost pressures are also easing, Bellinger said. After a period of heavier investment, wage growth is expected to normalize near 2% annually, a shift that is already beginning to improve operating leverage.
Taken together with resilient high-single-digit revenue growth, these factors support the more positive stance despite tougher year-on-year sales comparisons in the months ahead.
“In our view, +HSD% top-line growth is durable – and coupled with wage/OpEx growth easing – makes for a rare and compelling set-up,” Bellinger said.
He also drew parallels with mid-2017, when Costco shares experienced a similar pullback driven by fill-in warehouse activity before growth trends reaccelerated and the stock went on to outperform the broader market. Bellinger sees the current environment as closely resembling that period.
Mizuho lifted its price target on Costco to $1,000 from $950, based on applying an approximately 40x multiple to its fiscal 2028 earnings estimate of $25 per share.
The analyst additionally highlighted the possibility of another special dividend in fiscal 2027, citing Costco’s strong balance sheet and track record of returning excess cash to shareholders.