Costco is the IBD Stock Of The Day as it nears a breakout after a strong run in 2024. Costco stock offered an early entry on Wednesday, rising on positive analyst comments, while the broader market fell.
Sharing Crackdown = Netflix Moment?
The membership retail warehouse giant verges a Netflix moment, analysts at Morgan Stanley said, according to TheFly.com on Wednesday. Costco is cracking down further on membership card sharing by testing card scanners at select U.S. clubs. Morgan Stanley told investors that its channel checks suggest rising membership counts are a result of the strategy. Faster membership growth should provide potential upside, the firm said.
Therefore, Costco "could soon deliver a Netflix moment" similar to the video streamer's soaring profits after a crackdown on password sharing. The firm kept a $950 target on overweight-rated COST stock.
On Tuesday, Peloton announced it is partnering with the retail giant to sell its Bike+ in 300 Costco stores and on the Costco website. Costco is working to attract younger, fitness-conscious customers to its warehouse superstores.
Costco Stock Rises Near Buy Point
Shares of Costco rose 0.6% to 899.24 on the stock market today. Costco stock is less than 3% below a 923.83 buy point from a second-stage, six-week flat base, according to MarketSurge pattern recognition. The base rides neatly on support at the chart's 50-day moving average.
IBD added Costco stock to SwingTrader on Wednesday. That came as shares cleared the converged shorter- and longer-term moving averages, breaking a recent downtrend and offering an early entry at $902.49.
The relative strength line for Costco stock remains well below its September high. An RS line moving to new highs as the retail leader tries to break out would send a positive sign. A rising RS line means that a stock is outperforming the S&P 500 index.
Netflix stock holds a spot on the IBD 50 list of top growth stocks. Shares fell on Wednesday. Peloton stock also retreated after rallying Tuesday on the Costco news.
Costco Earnings Eye Membership Fee Boost
The IBD Stock Checkup tool shows that Costco stock is currently the No. 2 discount retailer, behind only Walmart, in terms of its IBD Composite Rating.
Costco earns a Comp Rating of 85, RS Rating of 86 and EPS Rating of 86, all out of a best-possible 99. Walmart stock holds a Comp Rating of 90.
On Oct. 10, Costco reported rising comparable sales in the U.S. and globally in September. The retail chain said monthly sales actually benefited from Hurricane Helene and port strikes.
In September, the warehouse retail chain beat earnings estimates for its fiscal fourth quarter. Net sales slightly missed views. The company reported cautious consumer spending on higher-ticket, discretionary items like furniture. Grocery and staples demand held up.
During the Costco earnings call, CFO Gary Millerchip said most of the benefit from a recent membership fee increase will come later in 2025 and into 2026.
The annual Costco membership fee hikes, announced in July and effective Sept. 1, marked the first increase in seven years for customers in the U.S. and Canada.
For fiscal 2025, analysts project Costco earnings will grow almost 8% per share. That would compare to a 17% jump in fiscal 2024, which ended Sept. 1.
Year to date, Costco stock has jumped 36% to all-time highs amid the membership fee hikes.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
