Costco could add 4 million members from crackdown, says Morgan Stanley

Costco could follow in the footsteps of Netflix and start a crackdown on membership sharing, according to Morgan Stanley. “Costco’s ongoing roll-out of membership card scanners at its U.S. clubs could soon deliver a Netflix moment,” analyst Simeon Gutman wrote in a note to clients this week. “Our channel checks suggest membership counts at selected Costco locations, following implementation of the scanners, is rising by double digits.” The analyst has an overweight rating on Costco, and his price target of $950 implies more than 6% upside ahead, based on Tuesday’s close. Netflix has seen a surge in subscriptions in the aftermath of its crackdown on password sharing . Morgan Stanley estimates that of the approximately 100 million non-paying households that shared a membership with Netflix’s paying households, the media streaming company will have converted as many as 25 million in 2023 and the first half of 2024. If the warehouse retailer likewise successfully converts non-fee paying customers through its card scanner roll-out, it could see an additional 4 million members join its current 76 million-member base worldwide, Gutman found. This “lift effect” has an upside potential of $324 million in operating profit and earnings of 54 cents per share, according to Morgan Stanley estimates. Earlier this year, Costco raised its membership fees in the U.S. and Canada for the first time since 2017. An annual Costco membership now costs $65, while a higher-tier “Executive Membership” costs $130 annually. COST YTD mountain COST, year-to-date Costco shares rose as much as 1.4% early Wednesday to $905.68 following Morgan Stanley’s comments. The stock has soared almost 37% in 2024.