Best Stocks To Buy Right Now: Amazon Vs. Costco

Online shopping, cloud computing and digital advertising should help Amazon post lasting revenue growth.
Costco memberships not only drive repeat purchasing behavior, they also generate a high-margin revenue stream.
After considering valuation and optionality, it becomes clear which is the best investment opportunity.
10 stocks we like more than Amazon ›

Amazon (NASDAQ:AMZN) and Wholesale Costco (NASDAQ: COST) There have been impressive investments in the past. Over the past decade, shares of the e-commerce and cloud computing giant have risen 566% (as of December 30). And the actions of the warehouse club operator have produced a total return of 533%. These gains are considerably ahead of the performance of the broader market.

Both of these large cap stocks They have their own investment merits. But between Amazon and Costco, which is the best business to shop at right now?

Amazon Prime van on the street. — Image source: Amazon.

One of Amazon’s most incredible feats is how it has become a leader in numerous industries. This goes back to the company’s culture of innovation and disruption, as it always looks for ways to improve the customer experience no matter what market it decides to enter.

It dominates online shopping, thanks to its well-oiled logistics network that offers fast, free shipping and a huge marketplace that sells just about anything under the sun. Amazon Web Services is a thriving cloud platform that is seeing more success these days thanks to the advent of artificial intelligence. Amazon is growing digital advertising revenue at a rapid pace, which is surely registering a high margin. The company is also involved in the healthcare and autonomous driving industries.

Amazon has developed a wide economic moat that is due to its brand, cost advantage, switching costs and network effect. This favorable setup makes it extremely difficult for any company trying to compete effectively against Amazon. It has the technological knowledge, as well as extensive financial resources, to stay ahead.

Costco seems incredibly boring compared to Amazon. But that doesn’t mean it’s not a big business. Costco has a very loyal customer base. One of the reasons is that it sells high-quality products at super low prices in a simple shopping environment. The company is known to implement extremely low profit margins on its products.

Another reason Costco can drive repeat purchasing behavior is its membership business model. Households must pay annual fees to access the company’s huge warehouses. Consumers are incentivized to direct more of their spending activity to Costco. As a result, the company has a predictable revenue stream that amounted to $1.3 billion in the first quarter of fiscal 2026 (ending November 23). This also supports consistency same store sales growth, something every retailer wants.

Between fiscal 2015 and fiscal 2025, Costco’s net income increased 241%. Continued earnings that continue to grow give management the ability to pay one-time special dividends, such as $15 per share in January 2024, in addition to the regular payout. That can increase returns for investors.

No one will argue with you if you tell them that both Amazon and Costco are wonderful businesses. They provide significant value to their customers, record consistent revenue and profit growth, and have enduring competitive advantages. This means investors should keep both on their watch lists at a minimum.

However, I see Amazon as the better stock to buy between the two right now. Valuation is a critical deciding factor. The shares are trading at a price-earnings ratio (P/E) of 32.6. That’s significantly cheaper than Costco’s P/E multiple of 46.3.

Another important variable to consider, and one that could be overlooked, is the presence of optionality. Costco’s business is not changing at all. It is extremely predictable. And investors can be confident that within a decade or two operations will be almost identical to what they are today. The market certainly values this stability, as the valuation indicates.

If you look at Amazon, on the other hand, it operates at the intersection of several interesting technology trends. This not only provides numerous growth drivers, but also means that the company has choice on its side. As a result, Amazon is able to grow its profits at a much faster rate.

Before you buy shares in Amazon, consider this:

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool ranks and recommends Amazon and Costco Wholesale. The Motley Fool has a disclosure policy.

Best Stocks to Buy Right Now: Amazon Vs. Costco was originally published by The Motley Fool

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