As Costco Launches Medicare Advantage Plans, Here’s How You Should Play COST Stock

Costco Wholesale Corporation (COST) is known for bulk groceries, oversized toilet paper packs and, of course, that famous $1.50 hot dog. But the warehouse giant is quietly adding something very different to the shopping list – Medicare.

According to the Wall Street Journal, Costco is preparing to enter the massive Medicare market through a partnership with SCAN Group, a nonprofit insurer. The plan is to launch Costco-branded Medicare Advantage products in two states, along with a Medicare supplement product in a third. The companies have not disclosed the exact locations because federal regulatory approval is still pending. Together, those three markets represent roughly 5 million Medicare enrollees.

The opportunity is anything but small. Medicare represents more than $600 billion nationally for insurers, giving Costco another potentially meaningful avenue to deepen its relationship with its massive membership base. But there is one important catch. Costco members won’t receive a special discount on these Medicare plans, as federal rules prohibit that. Instead, the products will be offered through Costco stores, insurance agents and websites.

This is not exactly Costco’s first step outside the warehouse aisles. The company already offers travel packages and has been expanding into standalone gas stations after space became tight at some warehouse locations.

For investors, the question is whether this new healthcare venture can become another useful piece of Costco’s expanding business model. 

About Costco Wholesale Stock

Founded in 1976 and headquartered in Issaquah, Washington, Costco is a global membership-only warehouse retailer and the world’s third-largest retailer, with a market cap of $424.4 billion. It offers groceries, fresh produce, appliances, and essentials at low prices, alongside fuel stations, pharmacies, optical, and travel services.

Its model is driven by membership fees, allowing lower reliance on product margins. Costco caps markups at roughly 14% for national brands and 15% for its private label, Kirkland Signature – far below typical retailers – supporting high-volume sales, strong customer loyalty, and consistent long-term growth.

Costco stock has taken a breather recently, but the story appears brighter again. Last year, worries about slowing comparable-store sales weighed on the shares and kept investors cautious. More recently, however, improving monthly sales have helped bring some confidence back.

COST stock climbed to a high of $1,096.50 in May before giving back some gains. It is now 14.3% below that peak. But shares of the membership warehouse operator are still up 9.2% year-to-date (YTD), showing that investors have not exactly walked away from Costco.

And there’s a reason for that loyalty. Costco’s membership model provides a steady stream of high-margin fee income, while its renewal rates remain remarkably strong. U.S. and Canadian renewal rates are above 92%, with global renewal near 90%. In other words, most members keep coming back and paying for the privilege.

Technically, the setup looks a little mixed rather than clearly bullish or bearish. The 14-day RSI is 45.55, suggesting the stock still has some positive momentum without being in overbought territory. However, the MACD line remains below its signal line, while the histogram shows negative bars, pointing to some near-term weakness.

Valuation-wise, COST stock is not exactly cheap, priced at 47.07 times forward adjusted price-to-earnings and 1.55 times sales. Both figures sit above sector peers and Costco’s own five-year averages. Still, investors seem willing to pay the premium because the company continues to execute consistently.

The dividend adds another steady touch. Costco has raised its payout for 21 consecutive years and currently pays $5.88 per share annually, giving investors a modest 0.61% yield. With a payout ratio of 27.18%, the company still has plenty of room to keep increasing its dividend without putting too much pressure on its finances.

A Snapshot of Costco’s Q3 Report

Costco’s fiscal 2026 Q3 results in May were impressive, with both revenue and earnings coming in ahead of Wall Street’s expectations. The company continued to benefit from healthy store traffic, higher average spending per visit, strong digital demand, membership growth, and solid performance across key merchandise categories.

Total revenue, including net sales and membership fees, rose 11.6% year-over-year (YOY) to $70.5 billion, while net sales also increased 11.6% to $69.2 billion. EPS climbed 15.2% annually to $4.93. Membership growth remained another bright spot. Costco ended the quarter with 82.9 million paid members, up 4.1%, while total cardholders increased 4% to 148.5 million. Executive memberships jumped 9.6% to 41.2 million.

Renewal rates remained strong, with the U.S. and Canada rate improving 10 basis points sequentially to 92.2%. The worldwide renewal rate held at 89.7%. Costco also launched Executive Membership in China, with early adoption described as strong.

Technology is becoming another piece of the growth story. Costco expanded mobile cake ordering, rolled out shopping-cart pre-scan technology internationally and increased app-based notifications. AI-powered product search and personalized recommendations also helped improve conversion rates.

Costco saw record gasoline volumes as members looked for fuel savings amid higher gas prices. Financially, the company ended Q3 with $18.9 billion in cash and $5.7 billion in long-term debt. Operating cash flow for the first 36 weeks reached $11.1 billion, while Q3 capital spending was about $1.41 billion. For fiscal 2026, Costco expects roughly $6.5 billion in capital expenditures for warehouse expansion, remodels, supply-chain investments and digital initiatives.

Costco’s latest sales report suggests shoppers are still opening their wallets at its warehouses. For the four weeks ended Aug. 2, July net sales climbed 10.7% YOY to $23.12 billion. Through the first 48 weeks of fiscal 2026, sales reached $273.55 billion, up 10.1%. Comparable sales increased 8.9%, led by a 10.3% gain in the U.S., while Canada rose 4.2% and other international markets gained 6%.

Even after adjusting for fuel prices and currency movements, comparable sales remained solid, rising 6.6%. The U.S. increased 6.9%, Canada 4.9%, and other international markets 6.6%.

Analysts tracking Costco anticipate the company’s fiscal 2026 EPS to be $20.42, up 13.5% YOY, and then grow by another 10.2% annually to $22.51 in fiscal 2027. 

What Do Analysts Expect for COST Stock?

Overall, Costco has an overall rating of “Moderate Buy.” Of the 36 analysts covering the stock, 19 suggest a “Strong Buy,” four advise a “Moderate Buy,” 12 recommend a “Hold,” and one is skeptical, having a “Strong Sell” rating.

COST stock still has room to run, at least if analysts are right. The mean price target of $1,101.56 points to a decent 17.2% upside potential. Meanwhile, BMO Capital’s Street-high target of $1,315 suggests the stock could rise by as much as 39.9% from current levels. That kind of optimism reflects confidence that Costco can keep growth steady, protect its margins, and keep utilizing its membership model as pricing trends start tilting in its favor.