Costco Quarter Signals Record Stock Run Not Done Yet: New Price Target

Costco Wholesale Corporation (COST) has been on a record stock run, and its latest quarterly results suggest that the bullish momentum is far from over. The warehouse club retailer reported strong earnings and sales growth, driven by a combination of factors that bode well for its future prospects. In this article, we will analyze the key drivers behind Costco's impressive performance and provide an updated price target for the stock.



Membership Fee Increase Boosts Revenue

Costco's membership fee increase, implemented on September 1, 2024, contributed significantly to its revenue growth in the past quarter. The price hike of $5 for the Gold Star membership and $10 for the Executive membership resulted in a 13.2% increase in membership fee revenue, reaching $1.17 billion. This growth, coupled with a 7.2% increase in total company comparable sales, excluding fuel, drove Costco's adjusted earnings per share to $4.04, surpassing Bloomberg consensus estimates of $3.81.



Strategic Sourcing and Inventory Management Mitigate Tariff Impacts

Costco's strategic sourcing and inventory management have been instrumental in mitigating potential tariff impacts and maintaining competitive pricing. The company's long-term contracts with suppliers and diverse sourcing strategies have helped it navigate the volatile global trade environment. Additionally, Costco's focus on inventory optimization, including efficient stock management and timely restocking, has enabled it to minimize disruptions in its supply chain and offer consistent value to its members.

Customer Retention and New Membership Sign-ups Unaffected by Fee Increase

Costco's membership fee increase in September 2024 has not deterred customers, as evidenced by the company's strong Q1 2025 results. Despite the price hike, Costco reported a 5.1% increase in foot traffic and a 0.1% rise in ticket size, indicating that customers remain loyal to the warehouse club's value proposition. The company's membership fee revenue also grew by $1.17 billion, suggesting that new membership sign-ups have not been negatively impacted by the price increase. This demonstrates that Costco's customer base is willing to pay a premium for the quality, variety, and value that the company offers.

Updated Price Target

Based on Costco's strong quarterly results and the positive outlook for the company, we are raising our price target for the stock to $1,100. This target reflects our confidence in Costco's ability to continue delivering robust earnings growth and maintaining its competitive advantage in the retail sector.

In conclusion, Costco's latest quarterly results signal that the company's record stock run is far from over. The membership fee increase, strategic sourcing, and customer loyalty have all contributed to the company's impressive performance. With an updated price target of $1,100, investors can expect Costco to continue its bullish momentum in the coming quarters.