What Costco’s Membership Fee Hike Could Mean for Its Stock

After Costco (COST) said Wednesday it plans to raise membership fees for the first time in seven years, several analysts raised their price targets for Costco stock, anticipating the higher fees could boost the retailer’s bottom line.

Costco said its “Gold Star” and business membership fees will rise $5 to $65, while executive membership fees will rise $10 to $130. The price increases will take effect in the U.S. and Canada in September, impacting about 52 million memberships.

Higher Membership Fees Could Help Raise Costco’s Earnings, Value Proposition

Several analysts raised their price targets for Costco stock following the announcement, citing the likelihood that profits would rise along with Costco’s membership price.

Costco, however, has said it would use money raised from higher member fees to reinvest in the business with wage increases for Costco employees and lower prices in stores to enhance Costco’s value for customers.

At the higher end, Jefferies analysts lifted their price target for Costco stock to $1,050 from $860, projecting that the lift to Costco’s earnings per share (EPS) from membership hikes could be about 3% over each of the next two years.

Raising their price target to $962 from $874, Bank of America analysts said Costco could also “gain share in the current environment as consumers continue to adjust to higher prices, making COST’s impressive value proposition and price positioning even more attractive.”

Despite the positive comments from analysts, Costco shares finished 4.3% lower Thursday at $846.59. Still, the stock has climbed over 28% since the start of the year.