Costco (NASDAQ:COST) Q4 FY2025 Earnings Analysis: Strong Results Amid Market Caution

I’ve been closely tracking Costco for years - it's a steady performer in a volatile market, and its latest Q4 FY2025 earnings gives me reasons for cautious optimism. Costco posted a revenue of $86.16 billion, slightly beating analysts' expectations of $84.4 billion and growing 8.1% YoY. EPS came in at $5.87, also ahead of the $5.80 consensus and up 11.6% YoY. This quarter reinforced Costco’s core strengths: efficient operations, loyal membership base, and strong cost discipline. What stood out to me was the 13.5% jump in e-commerce - a clear sign the retailer is executing on its omnichannel strategy effectively.

However, despite the solid report, the stock didn’t pop post-earnings. It’s been trading lower since its February highs, and I suspect that’s due more to broader economic caution and valuation concerns than anything Costco did wrong. Several sentiment signals suggest traders are positioning for potential downside in the short-term, even though the long-term thesis remains intact. Valuation remains rich - which opens the door for a pullback if momentum doesn’t return quickly.

In my view, we’re at one of those classic Costco crossroads: fundamentals are strong, but the market wants a reset on price. I’m watching key technical levels closely before making any sizable move.

Earnings Highlights

• Revenue: $84.4 billion (+8.1% YoY, beat by 0.18%)
• Net Income: $2.61 billion (+11.6% YoY, net margin 3.0%)
• EPS: $5.87 (+11.6% YoY, beat by 1.2%)
• E-commerce Growth: +13.5% YoY
• Guidance: Not provided for the next quarter or fiscal year

Financial Analysis

Costco once again put up a resilient set of numbers in Q4. The driving force behind the top-line growth was higher volumes across grocery, fresh foods, and health categories, coupled with a significant boost in e-commerce activity. That 13.5% e-comm growth isn’t just a blip - it's part of a broader transformation where Costco is modernizing its digital presence to better connect with younger consumers. Management hinted at this shift during the call, citing increased engagement from new Gen Z members.

Margins stayed healthy (3.0% net income margin) and expanded YoY, which is impressive in a cost-sensitive climate. While the report didn’t provide specific gross or operating margins, the EPS growth outpaced revenue, which suggests continued discipline in SG&A and inventory management.

What worries me slightly is that guidance was a no-show. That could be due to macro uncertainty, perhaps stemming from pricing pressures or FX headwinds. But as a trader, when companies with strong execution histories start withholding outlooks, that’s usually an early signal of upcoming turbulence - whether from slowing same-store sales growth, wage inflation, or intensified discounting pressures.

Valuation is another concern. At ~52x forward earnings - compared to Walmart at 39x and Amazon at 35x - Costco is priced for perfection. Any slowdown, even modest, could trigger a repricing.

Technical Analysis Summary

Looking at the charts, COST is in a classic consolidation phase and shows a neutral-to-bearish bias in the near-term. The weekly chart reveals a symmetrical triangle forming, with support near $945 and resistance up at $1,034 -consistent with a tightening range between the 23.6% Fibonacci retracement level and broader resistance from earlier this year.

Two patterns caught my eye:

• Head and Shoulders (Weekly): From a swing trade perspective, this is concerning. The right shoulder failed to breach prior highs, and the neckline is hovering near $900. A break below that could trigger a more pronounced correction. 
• Pennant Formation (Daily): This suggests a buildup in volatility. With Bollinger Bands tightening and RSI sitting at 48.17 (neutral), the next move could be larger than average. COST typically moves ~$34 on earnings day historically, and while that didn’t happen this time, the pressure is still building.

MACD is flat, signaling indecision, and the stock is still below its 200-day SMA (~$976), which is the level I’m watching for a bullish pivot. If that breaks, we could see a run back toward $1,035. However, if $940 gives way, there's room down to $910 or even $863 based on past retracements.

Risk-reward right now favors patient accumulation - but only after a convincing reversal signal.

Analyst Verdict

So where do I land on Costco right now?

• Rating: Hold (Short-Term), Buy (Long-Term)
• Buy Zone: Below $900-910 (oversold risk/reward significantly improves)
• Watch For: Breakout above $976 (could signal renewed uptrend); breakdown below $940 (short-term weakness)

Costco delivered on its fundamentals - solid revenue, growing EPS, and strong e-commerce momentum. But tech-heavy valuation multiples, trading under key averages, and mixed short-term signals tell me we’re not out of the woods yet.

Personally, I’m not rushing in at current levels. I’ll be waiting to see if support at $940 holds. If it does and volume picks up, I could scale into a position ahead of a potential Q1 holiday-driven boost. But if it breaks, I’ll look to buy deeper into weakness because long-term, Costco is best-in-class.

As always, discipline and patience win the game over chasing every move. Let's see what the next few sessions bring.