Costco trades at an all-time high. Here's why the rally may continue

Costco Wholesale Corporation (NASDAQ:COST) rallied 3.80% on Friday afternoon and carved out a new all-time high of $962.00 earlier in the session. Notably, Costco (CPST) has outperformed retail giants Walmart (WMT) and Target (TGT) this week as investors weight the impact of the U.S. election on growth and tariffs.

Earlier this week, Costco (NASDAQ:COST) reported solid core comparable sales of 6.5% in October. Total net sales were up 7.2% during the month. Jefferies analyst Corey Tarlowe said those marks were impressive because the threat of port strikes and two major hurricanes pulled some demand forward to September.

An even more intriguing factor with Costco (COST) is the ongoing roll-out of membership card scanners at its U.S. clubs. Morgan Stanley analyst Simeon Gutman thinks the retailer could see a Netflix (NFLX) moment because its channel checks suggest membership counts at selected Costco locations with the scanners are rising by double-digits. The view is that Costco (COST) may see an earnings boost, similar to what the streaming giant realized after its crackdown on password sharing.

"Although a very different business model, Netflix’s recent experience may provide a template for what Costco could see. In February 2023, prior to the roll-out of restrictions, Netflix indicated an estimated ~100m+ non-paying households were taking advantage of ‘shared’ use of memberships owned by the company's ~231m paying households, with an estimated ~30m of the non-paying households located in the U.S. and Canada."

Applying the NFLX scenario to Costco (COST) suggests upside potential to membership fee income as the company coverts some non-customer visitors to paying customers. "Our base scenario suggests Costco could capture an additional 4 million members through conversion of non-fee paying customers in North America, effecting a ~5% discrete lift effect to its worldwide total subscriber count of ~76m," wrote Gutman.

Investors are also watching Costco (COST) for news of a stock split now that the share price is threatening to breach the $1,000 level. The company fired off its last stock split in January 2000. At the time of that split, Costco's (COST) stock was trading for a pre-split price of about $100.