Costco has posted strong earnings while other retailers stumble. Is it a buy?
jetcityimage/iStock Editorial via Getty Images

Big box wholesale club Costco (NASDAQ:COST) recently announced strong quarterly results, but the stock has lost ground in 2022 amid general turmoil in the retail sector.
Can the company hold up better than its peers in the face of inflation and a shaky economy? If so, does the stock represent a buy at these levels?
Facing a Retail Whirlwind
COST has lost ground in 2022, falling by about 17% since the end of last year. Meanwhile, shares sit about 23% below their all-time trading high of $612.27.
However, much of this slide has been driven by macro factors and general retailing weakness, not issues specifically related to the company. For context, the S&P 500 as a whole has fallen about 13% for 2022. Meanwhile, COST's current price represents a 16% improvement over its 2022 low of $406.51, set back in May.
Looking longer-term, COST remains 23% higher over the past 12 months, while the S&P 500 has dipped 1%.
Turning to some of its retailing peers, COST's stock performance is competitive with names like Walmart (WMT), which has fallen 15% in 2022. However, it significantly outperforms many high-profile sector mates, with Target (TGT) dropping 32% year-to-date and Gap (GPS) falling more than 40%.
Meanwhile, Costco (COST) provided strong earnings in its latest quarterly report but finds itself inside a retail sector that has run into significant headwinds, with higher costs and consumers having their spending power reduced by inflation.
At the same time, many retailers have seen their inventories switch from under-supplied to overstocked, as they attempt to navigate changing spending patterns and ongoing supply chain tangles. 
Is COST a Buy?
For COST, the company has benefited from its value proposition, offering consumers the chance to purchase products in bulk at a discount. As such, the firm recently reported that its Q3 non-GAAP EPS beat estimates by $0.15, coming in at $3.17. Furthermore, the firm also surpassed revenue expectations, with a top-line figure that rose 16% from last year to $52.6B. This exceeded analysts' consensus by $1.11B. 
Aside from strong earnings, Wall Street has come to the stock's defense. Recently, Oppenheimer upped its price target to $525 from $500.
Additionally, Wells Fargo noted: âMembership trends have been excellent, with the best first year and overall renewal rates in history. Its customer is holding up very well. The company's inventory position seems relatively good and management expressed confidence in its ability to navigate the inflationary backdrop.â
Taking a broad view of market sentiment, the Street seems to have a relatively optimistic outlook on COST as about two-thirds of analysts view the stock as favorable. Of the 34 analysts surveyed by Seeking Alpha over the past 90 days, 16 classify COST as a Strong Buy while seven label it as a Buy. At the same time 11 tag COST as a Hold and no analysts list the firm as a Sell.
See outline below:

Aside from Wall Street, Seeking Alphaâs quantitative metrics view the stock more cautiously, characterizing it as a Hold. Specifically, the Quant Ratings give COST an A+ when looking at profitability but issue it an F for valuation. Momentum and growth are listed with grades of a B and C, respectively.
For a deep dive into the stock, Seeking Alpha contributor Alexander Ebbinghouse holds a bullish view on COST. He frames an opinion that Costco has dropped in an unjustified sell-off after Target's (TGT)
massive earnings miss. However, the drop brings a great buying opportunity.
At the same time, JR Research, another contributor, reiterated a Sell rating on COST, as it's still expensive and has more room for downside.