Costco will be a $500 billion stock by 2026

Today, only seven trillion dollar stocks are publicly traded: Apple, Microsoft, Amazon, NVIDIA, alphabet, Meta-platformsAnd Berkshire-Hathaway. There are another 10 stocks that have a market value of more than half a billion. Just like Berkshire Hathaway only recently became a trillion-dollar stock, these other 10 are excellent stocks that will likely join the club at some point in the future.

There are a few more right behind it. Costco Wholesale (NASDAQ: COST) is ranked 23rd on the list of most valuable publicly traded companies with a market cap of $389 billion. Costco stock is up 33% this year and continues to beat the market despite its high valuation. The company should also beat the market over the long term and will likely join the club of companies with a half-trillion dollar market cap by 2026.

What's going well at Costco

Investors love Costco stock, and for good reason. It's a reliable growth driver under almost all circumstances, including recessions and inflation. It has a strong cash position, an excellent return on capital, and robust profitability.

It starts with the company's membership model. Customers like to shop at its massive warehouses, where they can get the best deals on many products. Costco uses its advantage as one of the nation's largest retailers to get great prices from suppliers. The company operates warehouses with minimal equipment and sells in bulk, often on pallets, to pass on the bargains at a small markup. Members must pay an annual fee, which recently rose to $65 for the basic plan, but enough members believe they make up for it with the savings that the global renewal rate is over 90 percent, and as high as 93 percent in the United States and Canada. The company also attracts millions of new members each year.

What could change things, but shouldn't

A lot can happen between now and 2026 that could impact Costco and its stock. Inflation appears to be under control enough for the Federal Reserve to cut interest rates later this month, and lower inflation with lower interest rates could lead to a stimulated economy. That could impact retailers like Costco as people spend more freely, especially on more expensive items.

If sales and earnings grow faster than Costco stock, the company's valuation, currently at record levels, could finally come back down to earth. Instead, however, a horde of bull market enthusiasts who will come out of hiding when interest rates are cut could keep the price high. When that happens, the price will likely fall at some point.

However, one of Costco's wonderful qualities is its resilience in the face of changing trends and the global economy. Whether interest rate changes lead to gains, valuation changes lead to losses, or anything else happens, Costco stock should grow over time.

Can Costco stock reach $500 billion?

A market cap of $500 billion represents a 29% gain from today's price. Costco stock has already surpassed that gain this year. Although the latest quarterly report was for the third fiscal quarter (which ended May 12), monthly reports for June, July and August have already been released, and they were similarly stellar. Costco stock is set to finish this year with a big gain.

A market cap of $500 billion implies net income of $9.26 billion, or an increase of 29%, at a current price-to-earnings (P/E) ratio of 54. Trailing-12-month net income is currently $7.17 billion. Costco's net income doesn't typically grow that much per year, which is why I don't think the company can hit that milestone next year without getting a much higher valuation, which seems unlikely. But with a little more time and some increase in valuation that could come with bull market enthusiasm, Costco could join that club in 2026.

Should you invest $1,000 in Costco Wholesale now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jennifer Saibil has positions at Apple. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Costco Wholesale, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.