BING-JHEN HONG
Costco Wholesale Corporation (NASDAQ:COST) trades near its all-time high of $856.18 after a 66% rally over the last 52 weeks.
Looking ahead, analysts have identified five catalysts that could propel shares even higher in 2024.
Fee increase
A membership fee increase in the next two years is anticipated by Evercore ISI, Oppenheimer, and Wells Fargo. Evercore analyst Greg Melich highlighted that a fee hike would help accelerate Costco’s (COST) EBITDA growth from the high single digit range to low double digits for a full two years.
Special dividend
While Costco (COST) just paid a $15 per share special dividend earlier in the year, analysts have been speculating about the timing of the next announcement, with Costco (COST) sitting on over $10 billion in cash. Looking back further, Costco (COST) paid a special dividend of $10 per share in 2020, $7 per share in 2015, and $5 per share in 2015. However, a surprise special dividend on a much shorter time interval than in the past is being talked about.
Data and AI
Costco (COST) has been gathering a significant amount of data on customers trends, but personalization has been noted to still be in the early innings on a relative basis. Costco (COST) already uses machine learning models to forecast demand for each bakery item it produces daily. The retailer’s AI system analyzes 7 years of historical sales data, along with factors like weather, holidays, and local events, to predict how much of each baked good needs to be made. The AI integration helps reduce food waste by ensuring the right quantities are prepared based on anticipated demand.
Tech firepower in stores
Costco has introduced self-checkout kiosks, digital signage, and interactive displays in its physical stores to streamline the shopping experience and provide real-time updates to customers. Costco (COST) is seen benefiting from new initiatives as it plays catch up to Sam’s Club with its Automation/Scan and Go/Just Walk Out features.
Flight to safety
Costco’s (COST) track record during tougher economic times suggests that its sticky membership model, with an upper income consumer and staple-esque product mix, should sustain positive topline growth in a slowdown or mild recession scenario. Analysts think Costco (COST) could attract investors in a flight-to-safety market backdrop.
