Another banner year for Costco shares has prompted some on Wall Street to question whether the stock is out over its skis. Jim Cramer knows where he stands: Let it ride. Shares of Costco are coming in hot ahead of earnings Thursday evening. The stock posted an all-time closing high Friday of $992.61 — and it's on track for another record finish above $993 a share Tuesday. Over the past month, Costco is up more than 5%, outperforming the S & P 500 , which has added roughly 1% during the same period. The longtime Club stock has trounced the market this year, advancing around 50%. The S & P 500 is up nearly 27% year to date. Costco also crushed the index in 2023, soaring 44.6% versus 24.2% for the S & P 500. Some analysts believe there is more room to go. On Tuesday, Wall Street firm Oppenheimer upped its price target on Costco shares to $1,075 each from $980, implying roughly 9% upside from Monday's close. That follows multiple price target increases last week from analysts at firms including Bank of America and Jefferies. Oppenheimer also reiterated its buy-equivalent outperform rating on the stock even at these lofty levels. Costco "remains the gold standard in retail," Oppenheimer analysts said in their Tuesday note to clients, expressing confidence in the membership-only retailer's ability to maintain topline growth into the holiday shopping season. They're also expecting membership growth to accelerate after Costco implemented scanners at the entrance to prevent double card usage. While analysts acknowledged that Costco's stock valuation is in "unchartered territory," they argued that the premium is warranted due to the company's growth prospects, competitive position in retail, and a strong track record of market share gains. Shares are currently trading at roughly 54 times forward earnings, compared with a five-year average of 38 times, according to FactSet. COST .SPX YTD mountain Costco's year-to-date stock performance versus the S & P 500 in 2024. Investors will get a closer look at the state of Costco's business after the close Thursday, when the retailer reports earnings for the three months ended in November. The Street projects Costco earned $3.79 a share on revenue of $62.08 billion, according to estimates compiled by LSEG. The results will notably cover some of the important holiday shopping period, and management's commentary on shopper behavior in the quarter — and what is expected in the coming weeks — will be instructive. U.S. consumers appear keen on still spending, according to a Stifel survey published Monday. Shoppers showed improved holiday spending intentions across all income levels, analysts found. Consumers plan to spend roughly 8% more on holiday shopping this year versus 2023, according to Stifel's survey. The analysts concluded that big retailers, particularly Costco and Walmart , should continue to attract more customers during this period and pick up market share. For its part, Stifel analysts also see Costco's premium valuation as warranted and stood by their buy rating on the stock, though they advised waiting for a pullback before purchasing more shares due to its recent outperformance. Bottom line Jim has long acknowledged Costco's premium valuation, but he has consistently argued it's worth paying up for such a high-quality company with a durable business model. Jim's Charitable Trust, the portfolio we use at the Club, has owned Costco since early 2020. In the years that have followed, the stock has had a massive run that has continued in 2024. We have not booked any profits this year, unlike some large-cap tech stocks that have rallied. Jim said Costco's subscription model, with impressive membership renewal rates above 90%, helps justify his long-term confidence in the stock. Costco's membership income is what helps the company deliver the low prices customers have come to know and love. "I would not take anything off from Costco because it has a membership model that I find superior to anything," Jim said Tuesday on CNBC. He likened it to the recurring revenue streams that Amazon and Netflix have. "Costco stays in the Trust, and I like it even up here," he added. (Jim Cramer's Charitable Trust is long COST, AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
