Research & Invest
Investor, Institutional Asset Management Background
Costco could gain massive market share as AI shopping agents route spending away from Amazon. Through Meta's Muse, one household bought sporting gear from Costco and Dick's, a Frigidaire from Costco and a Target e-gift card, well over $1K that bypassed Amazon, which is blocking Muse shopping. Amazon's retail strategy needs to evolve or it could quickly become the next Sears. x.comÂ
Costco's next membership fee increase should lift earnings sharply, because it makes almost no operating margin outside membership. Fees have been flat for 8+ years to shield members from inflation; a 25-50% rise in the next few years would raise earnings about 33%. Even doubling fees wouldn't drive members away, given the savings. Membership growing 25x in China and other emerging markets adds upside, so the 40x forward EPS multiple @JonahLupton cites misses the picture. x.comÂ
Costco is the preferred hedge against OpenAI's much higher valuation relative to revenue. Costco's cited $441B valuation comes with $275B revenue, versus OpenAI's $1.4T valuation and $50B revenue. x.comÂ
Amazon's faster AWS growth and broader profit support its investment case, but returns on infrastructure spending remain uncertain. AWS supplied about 60% of the $10.7B rise in operating income and North American retail about 37%. Trailing net capex of $210.7B exceeded $168.3B of operating cash flow. Much of the spend is on chips and servers with lives well under a decade; the test is how quickly capacity becomes AWS revenue. x.com x.com x.comÂ
Costco's slow growth in a finite market does not justify 30x earnings. It is a good model, but new members joining to buy in bulk to save money is not the strength bulls think it is. x.comÂ
Amazon's record AI spending looks backed by AWS demand, despite pressure on near-term profit. AWS grew 39% to $46bn, and CEO Andy Jassy projects growth above 40% in both 2027 and 2028. Quarterly capex reached $77.3bn, almost $20bn above expectations; the Q4 profit guide missed and retail ads softened. AWS acceleration makes the drop worth buying. Overweight; $370 target. x.com x.comÂ
Amazon's AWS growth remains strong despite slight earnings misses. AWS revenue rose 39% year over year in Q3. Increased 2027 capex could still weigh on the shares in the short term, even if demand continues to rise. x.com x.com x.com x.comÂ
Costco stock cannot be expected to make major gains soon at 40x earnings with only low double-digit growth. The company keeps executing well, yet the stock has been flat over the last two years. x.comÂ
Meta's Muse could bring in more cash flow than any product it has launched before, making shares in the $600s a sweet bet. Muse should create immense margin expansion, synergies, new revenue streams and services. Scaling capex is shrinking net income even as revenue keeps growing. x.comÂ
Costco's commitment to employees, such as covering a family's health care needs and adjusting work schedules for hard circumstances, drives a virtuous cycle. Being a good employer and corporate citizen and treating consumers honestly and fairly is rewarded with strong loyalty and financial success. x.comÂ
Costco is an amazing company, but at roughly 40x forward earnings its stock is pricing in a lot of perfection. x.comÂ
Amazon's block of Meta's Muse shopping agent protects its ad business but risks teaching shoppers that agents work fine without Amazon. An agent skips the search page where ad money is made; ads did $19.8B last quarter, up 26%, and likely hold most of the margin outside AWS. Every week Walmart, Best Buy and Wayfair are Muse's default answers adds to the risk. A deal is unlikely until Amazon's own agent stalls, and would then be an ad revenue share; lost volume can't show up yet. x.com x.comÂ
