What a forgettable year it’s been for shareholders of Costco (NASDAQ:COST | COST Price Prediction), which is actually attempting to stage a comeback after falling into a brutal bear market. Now down just shy of 20%, the bulk-buy warehouse retailer is in a rather difficult spot, as investors punish the higher-multiple growth names, including the ones that are doing well. While sales growth and renewals are still in a decent spot (though both have experienced a slower pace of growth), it seems like the lofty valuation is mostly to blame for what many would consider to be a lost year for the industry juggernaut. Going into the new year, there’s no clear catalyst for the slumping shares.
They’re arguably still expensive, and the membership might offer just a bit less bang for the buck, especially as outperforming rivals, most notably Walmart (NASDAQ:WMT), begin to flex their muscles on the quality front, while other consumers perhaps shift gears to more upscale retailers that they may have switched from when inflation was through the roof.
With shares of Walmart gaining more than 25% on the year, I think there is a bit of reason for concern on the part of Costco holders. For the most part, I think there’s really nothing fundamentally wrong with the Costco story. It remains an incredibly well-run company and one that could enjoy significant growth over the years as it expands its footprint at home and abroad. The winning formula will continue to work, even as consumer sentiment makes shifts (either upward or downward) from here.
Could a split hit in 2026 for Costco stock?
The only big question that I think investors must ask themselves is what multiple is right for shares of Costco and whether a share split is warranted in 2026. Even after shedding close to 20% of its value from peak levels, I think the shares remain quite out of reach of the smaller retail investors out there. Undoubtedly, $867 and change per share might not seem like much, but if one has $1,500 to invest with no access (or desire) for partial shares, it might not make a ton of sense to buy a single share while keeping the difference in cash.
It’s more of an inconvenience than anything else for the retail crowd. Either way, I think Costco might have what it takes to enjoy a “surge and split” of sorts in the new year, as the retail titan heads into a new year with a lower bar ahead of it and potentially overlooked catalysts that could bring the firm back to where it was way back in February of 2025.
For now, it’s important to note that there hasn’t yet been an official Costco share split announcement. That said, the case for splitting in 2026, I think, is a strong one, whether or not the stock can climb back up above the $1,000 mark. Of course, the availability of fractional shares might make a stock split a less pressing matter for the firm, but, regardless, I think any name that hits the four-figure mark ought to consider the potential benefits of going for a 10-for-1.
Costco stock has the drivers to bounce back
Personally, I think Costco has what it takes to return above that level, especially as the firm moves ahead with its expansion, while beefing up the legendary food court, and embracing the ongoing digital transformation (e-commerce and warehouse automation).
Arguably, Costco has more low-hanging fruit to grab as it embraces new technologies, and given this, I’d not bet against the name, even though shares still look overpriced at 46.7 times trailing price-to-earnings (P/E).
Relatively speaking, Costco might be a bargain right here, given its top rival, Walmart, goes for 39.1 times trailing P/E. I don’t know about you, but I’d rather pay an 18% P/E premium for Costco, especially in an environment where perceived value remains king in the world of retail.
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