Key Takeaways

  • Costco shares gained 2.5% in extended trading Wednesday after the retailer hiked its membership fees for the first time since 2017 and posted a jump in June sales.
  • Costco shares have recently broken out from a pennant pattern that indicates a continuation of the stock’s long-term uptrend.
  • The measuring principle, which calculates the distance of the uptrend preceding the pennant and adds that amount to the pattern’s breakout point, projects a price target in Costco shares of $1,032.

Costco Wholesale (COST) shares rose in extended trading Wednesday after the retailer hiked its membership fees for the first time since 2017 and posted a jump in June sales.

Starting Sept. 1, fees will increase to $65 for individuals and $130 for executive memberships, up from $60 and $120, representing an 8% hike for both categories. The fee increases, which Costco first cautioned about in May, will affect about 52 million memberships in the U.S. and Canada, with around half of those in the executive tier.

In the retailer’s latest quarter, membership fees tallied $1.1 billion, comprising about 2% of the company’s total revenue of $58.5 billion.

Costco also said Wednesday that June net sales for the five-week period ending July 7 came in at $24.48 billion, up 7.4% from $22.78 billion a year earlier, indicating that the retailer’s business model of offering a wide variety of products in bulk at low prices continues to resonate with consumers amid an inflationary environment.

Costco Shares Remain in Long-Term Uptrend

Costco shares have remained in a long-term uptrend since the 50-day moving average (MA) crossed above the 200-day MA to form a bullish golden cross signal in May last year.

More recently, gains in the stock have accelerated after a retracement to the 50-day MA, with the price breaking out from a pennant pattern earlier this month to suggest a continuation of the current trend.

Monitor This Key Level Amid Further Upside

Given there’s limited prior price action to compare with as Costco shares trade near their all-time high (ATH), investors can use the measuring principle to project a potential price target.

To do this we calculate the distance of the uptrend preceding the pennant in dollars and apply that amount to the pattern’s breakout point.

For instance, we add $177 to $855, which forecasts a price target of $1,032. This provides an area on the chart where the shares may face additional selling pressure, especially if other indicators point to overbought conditions at the same time.

Costco shares gained 2.5% to $906.70 in after-hours trading Wednesday.

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As of the date this article was written, the author does not own any of the above securities.