Costco (COST) is stepping into one of the biggest markets in American business. The warehouse chain is teaming up with SCAN Health Plan, a nonprofit insurer focused on seniors, to sell Costco-branded Medicare plans. It’s a limited start, with Medicare Advantage products launching in two states and a Medicare supplement in a third, all pending regulatory approval. But the Medicare Advantage market they’re entering is enormous, worth more than $500 billion a year.
The move makes more sense once you see what Costco has been building. Healthcare has quietly become one of its strongest growth areas. On the company’s most recent earnings call, management said pharmacy led the way among its extra services and gained significant market share in the quarter. The success came primarily from surging demand for weight-loss drugs like Wegovy and Ozempic. Costco members already fill prescriptions, buy glasses, and get hearing aids on their warehouse trips. Medicare is the natural next step.
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Why Seniors Are the Target
Costco’s edge has always been trust and value, and older adults are precisely the group that finds healthcare confusing and expensive. SCAN brings the insurance license and decades of experience with seniors, serving roughly half a million members. Costco brings its brand and millions of Medicare-aged shoppers. The plans would tie into Costco’s existing pharmacy, vision, and over-the-counter offerings, making the benefits easier to use. It’s still early, and the rollout is small. But the bigger picture is what matters. Costco is turning its most loyal, aging customers into more in-depth relationships, and Medicare is a huge market to grow into. For a company always looking to add value for its members, this is a patient bet on where its customers are headed.
The timing, I believe, is what makes it especially interesting. Big insurers like UnitedHealthcare (UNH) and Humana (HUM) have been pulling out of Medicare Advantage markets due to rising costs. So Costco is stepping in just as others retreat, betting its reputation for value can succeed where they’ve struggled.
About COST Stock
Costco Wholesale Corporation is a large retail company that operates membership-based stores in several countries. Customers pay for a membership to shop at Costco’s warehouses, where they can buy a wide range of products at competitive prices. These include groceries, snacks, and fresh food such as meat, fruits, vegetables, and deli products. It also offers household goods, furniture, appliances, electronics, clothing, and sporting goods. Costco also offers additional services at many of its locations, such as gas stations, pharmacies, food courts, optical, and hearing-aid centers. Founded in 1976, the company is headquartered in Issaquah, Washington.
The stock declined roughly 6% over the past year, underperforming the Consumer Staples Select Sector SPDR ETF (XLP), which delivered returns of 3% during the same period. However, year-to-date (YTD), the stock has only marginally underperformed the broader sector, rising 9% compared to the XLP’s gains of 10%.
www.barchart.comCostco trades at a modest premium to its own history. The forward GAAP price-to-earnings (P/E) of 46.31x sits just 5% above its 5-year average of 44.18x. Similarly, the price-to-sales (P/S) ratio of 1.40x is roughly 13% above its own average of 1.24x. So the market is paying up, but not by an unusual amount for a company that continues to grow steadily. The EPS outlook shows double-digit growth for the next few years. Analysts expect growth of 13% in 2026 and roughly 10% in 2027 and 2028 each. The numbers aren’t spectacular, but they indicate consistent growth for a company already worth over $420 billion.
The balance sheet is also a genuine strength. Costco holds $20 billion in cash against $8.23 billion in debt, leaving it net cash positive by around $11.77 billion. So this is a business priced for dependability. The premium looks fair as long as Costco keeps executing. The Medicare push won’t move these numbers soon, but it’s a sign of the long-term growth avenues Costco is quietly opening.
Costco Accelerates Expansion Strategy With $6.5 Billion Investment Plan
Costco Wholesale Corporation announced its third-quarter fiscal 2026 earnings on May 28. The company reported a strong quarter with significant year-over-year (YoY) growth in net income and net sales. It reported revenue of $69.15 billion, up 11.6% YoY. The earnings per share came in at $4.93, missing the Wall Street consensus of $4.98. The company reported net income of $2.192 billion, up 15% YoY. CFO Millerchip said traffic or shopping frequency increased 2.4% worldwide and its average transaction was up 7.3% worldwide. The company’s membership fee income rose by 10.7%, driven by growth in Executive memberships.
Looking forward, Costco has not provided any guidance. However, it targets 30-plus net new openings per year in the coming years. CFO Millerchip said that management expects $6.5 billion in capital expenditures for the full year. The company plans to continue expanding its warehouse footprint and enhancing digital capabilities.
What Do Analysts Expect for COST Stock?
Bernstein analyst Zhihan Ma reiterated a “Buy” rating on Costco and assigned a price target of $1,194. The analyst’s Buy rating reflects her confidence in the company’s growth profile and attractive long-term setup. As management plans to add 300 new warehouses over the next decade, supported by more flexible real estate strategies, this underpins a sustained expansion strategy in both U.S. and international markets. At the same time, membership trends remain healthy, with mid-single-digit member growth. In contrast, Roth MKM analyst Bill Kirk maintained a “Sell” rating on COST with a price target of $781.
Based on 36 analysts covering the stock, COST holds a consensus “Moderate Buy” rating. The mean price target of $1,101.56 reflects 11% upside from the current levels. COST has a high price target of $1,315 and a low price target of $781. Out of the 36 analysts, only 1 holds a “Sell” rating, which means the consensus is largely bullish.
www.barchart.com On the date of publication, Jabran Kundi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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