Memory Inflation Is Hitting Costco’s Electronics Business, and It Triggered a $152 Million Charge

Costco Wholesale Corp. (NASDAQ:COST) stock traded higher Friday after the company reported strong fourth-quarter results Thursday.

Costco reported quarterly earnings of $6.75 per share, beating the consensus estimate of $6.52.

Revenue came in at $95.72 billion, beating the Street estimate of $94.86 billion.

Analysts Update Costco Price Forecasts

Following the earnings report, several analysts revised their outlooks for Costco.

• Bernstein analyst Zhihan Ma maintained an Outperform rating and lowered the price forecast to $1,143 from $1,144.
• Mizuho analyst David Bellinger maintained an Outperform rating and lowered the price forecast to $1,065 from $1,100.
• DA Davidson analyst Michael Baker maintained a Neutral rating and raised the price forecast to $1,040 from $1,000.
• Wells Fargo analyst Edward Kelly maintained an Equal-Weight rating and lowered the price forecast to $950 from $1,000.
• Truist Securities analyst Scot Ciccarelli maintained a Hold rating and lowered the price forecast to $955 from $1,011.
• JPMorgan analyst Christopher Horvers maintained an Overweight rating and lowered the price forecast to $1,015 from $1,100.
• Roth Capital analyst Bill Kirk reiterated a Sell rating and maintained a $781 price forecast.
• Raymond James analyst Bobby Griffin maintained an Outperform rating and lowered the price forecast to $1,050 from $1,100.

RBC Sees Stable Fundamentals, Valuation Pressure

RBC Capital said Costco’s underlying fundamentals remain stable, while valuation multiples remain the biggest challenge.

Costco is also feeling the impact of higher memory prices in consumer electronics. RBC said the retailer recorded a $152 million LIFO charge, up from $43 million a year earlier, driven by memory-cost inflation in electronics and higher costs tied to oil-related products.

Shemesh is watching transaction trends, particularly as tariff refunds are reinvested, as well as membership growth. His model now includes expected tariff refunds in the first half of fiscal 2027 and updated margin, store-count and capital expenditure assumptions.

RBC projects comparable sales growth of 6% in fiscal 2027 and 6.1% in fiscal 2028. The firm raised its adjusted EPS estimates to $22.86 and $25.01, respectively, from $22.76 and $25.

DA Davidson Highlights Strong Comps

DA Davidson called the quarter another strong earnings report and noted that Costco confirmed its churro could return to food courts.

Total comparable sales rose 9.4%, or 6.7% excluding foreign exchange and gasoline price changes. U.S. comparable sales increased 10.7%, or 7.2% on the same basis.

Membership fee income was in line with expectations. Gross margin came in slightly below estimates due to a greater mix of gasoline sales, while operating income and EPS beat expectations on expense leverage.

Bank of America Raises Earnings Estimates

Bank of America raised its Costco EPS estimates to $22.83 from $22.79 for fiscal 2027, $25.14 from $25.07 for fiscal 2028 and $27.67 from $27.54 for fiscal 2029.

The analyst reiterated a Buy rating, citing Costco’s value-focused strategy and higher-income customer base.

Bank of America also expects Costco’s expanded DoorDash Inc. and Uber Technologies Inc. partnerships to be largely incremental and complement its existing Instacart offering.

Costco Price Action

COST Price Action: Costco Wholesale shares were up 2.46% at $918.53 at the time of publication on Friday, according to Benzinga Pro data.

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