Will Costco Stock Hit $1,000 in 2024?

Shares of Costco Wholesale Corporation (COST), a membership-based retailer, are up more than 34% year to date. Moreover, COST stock has gained approximately 57% over the past year. While Costco stock has already gained significantly, hitting $1,000 in 2024 doesn’t seem out of the question, especially as the value proposition continues to be very popular with consumers.

Let’s take a closer look to understand why Costco stock may continue to trend higher.

Costco’s Revenue Growth Prospects

Costco recently released its fiscal fourth quarter financial results. While the company’s shares fell on the news as it failed to meet Wall Street’s revenue expectations, the company’s overall performance remains strong and it is well positioned for future growth.

The warehouse giant reported total fourth-quarter sales of $79.7 billion, up 1% year-over-year. Total revenues, however, fell slightly below expectations. This shortfall can be attributed to currency fluctuations which impacted membership fee revenues, which remained unchanged.

However, Costco’s comparable sales rose 6.9%, beating Wall Street forecasts. The company saw an increase in shopper traffic, with global visits up 6.4% and U.S. traffic up 5.6%. This growth underscores the retailer’s appeal through competitive pricing and convenience.

Costco’s fourth-quarter results were also impressive. Earnings per share (EPS) of $5.29 increased 8% year over year and exceeded Wall Street expectations.

Costco’s revenues are expected to remain strong, driven by several factors:

• Strong membership base: Costco membership renewal rates remain high. At the end of Q4, the renewal rate in the US and Canada was an impressive 92.9%, while the global renewal rate was 90.5%. This demonstrates Costco’s ability to maintain its customer base, even in difficult economic conditions and difficult year-over-year comparisons.
• Growing number of paid members: Costco ended the fourth quarter with 76.2 million paid household members, up 7.3% year over year. Executive membership, which offers additional benefits, grew even faster at 9.6%. Executives now account for 46.5% of all paid memberships, generating 73.5% of global sales. This loyal, growing customer base provides a steady revenue stream and increases Costco’s long-term sustainability.
• Increase in membership fee: Costco recently announced an increase in membership fees, which has boosted earnings and stock performance in the past. While the fee increase, which went into effect on September 1, will have minimal impact at the beginning of the year, most of the benefits will be realized in the second half of fiscal 2025 and into 2026, further strengthening Costco’s financial prospects.
• Warehouse expansion: The company continues to expand its warehouse locations to offer more convenient shopping options, which should further increase traffic and sales.

Overall, Costco’s growing membership, high renewal rates, expanding reach and recent fee increases position Costco for continued strong sales and profitability growth in the coming years.

Dynamics of digital and e-commerce

Another bright spot is Costco’s e-commerce business. E-commerce traffic, conversion rates and average order value increased in the fourth quarter, driving strong comparable sales growth. Several categories, such as health and beauty products, home appliances, tires, toys and household products, recorded double-digit growth year-on-year.

As it strengthens its digital capabilities, Costco has introduced a “buy online, pick up in store” option for higher-priced products like TVs. This program has successfully reduced shipping costs and improved customer convenience. Costco is currently testing this model for laptops and other high-value items.

Additionally, Costco’s logistics business is expanding, particularly in handling large and bulky items such as appliances and furniture, which are key drivers of e-commerce growth. Last year, more than 4.5 million items were delivered through Costco Logistics, an increase of 29%. By continuing to improve delivery times and order scheduling, Costco aims to further enhance its online shopping experience.

Could Costco Stock Hit $1,000?

With a solid business model, loyal customer base and growing e-commerce capabilities, Costco is well-positioned for continued growth in 2024. The company’s pricing policy, disciplined approach to store expansion and focus on operational efficiency will drive its earnings and support pricing its shares.

While the company’s stock needs to rise about 13% to reach $1,000, Costco’s strong financial performance and growth strategy make this a realistic goal. While some analysts remain cautious due to its premium valuation relative to competitors, COST’s high valuation is justified given the company’s solid growth prospects and ability to deliver higher comparable sales.

Analysts rate Costco a “Moderate Buy,” with an average price target of $914.47, suggesting only a 3.3% expected upside from Friday’s close. However, given that Costco continues to execute well on its growth strategy, the $1,000 milestone could be within reach in 2024.

On the date of publication, Amit Singh did not have a position (directly or indirectly) in any of the securities mentioned in this article. All information and data contained in this article are for informational purposes only. For more information, please review Barchart’s Disclosure Policy here.