UBS: Costco membership will rise in 2017


UBS Global Research expects to see "continued progress" on Costco membership in the second quarter of 2017.

Worldwide membership renewals and new sign ups remain strong, driven by "increased acceptance of [Costco's] more attractive Visa CC offering in the US," according to the team in a note published on Monday.

UBS is referring to the "Costco Anywhere Visa Card" that lets consumers earn cash back on all purchases, including 2% on all purchases from Costco and Costco.com.

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The team sees renewals and new members, as well as an improving foreign exchange situation, driving $643.5 million in membership fee income.

The team believes that Costco could hike membership fees next quarter, or alongside second-quarter results. "Considering fees have historically accounted for ~75% of its EBIT, any increase would likely help support further upward momentum for its shares."

According to the team, Costco's current stock price "does not fully price in benefits from COST's move to Visa and its impending fee hike."

UBS maintains a "Buy" rating for Costco and a 12 month price target of $180. Costco reports second-quarter earnings on Thursday after market close.

The company is down -.33% at $176.98 a share on Monday morning, however it remains close to all time highs of $177.76 a share.

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Customers walk toward a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
Linda Wentzel shops for clothing at a Costco Wholesale Corp. store in East Peoria, Illinois, U.S., on Tuesday, May 26, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release third-quarter earnings figures on May 27. Photographer: Daniel Acker/Bloomberg via Getty Images
Customers wait in line to check out after shopping inside a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
Girls sit in a shopping cart as a customer pushes them past Halloween decorations displayed for sale inside a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
A customer browses a rack of clothes inside a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
Signage is displayed outside a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
A butcher works in the meat department inside a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
Cuts of meat are displayed for sale inside a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
A customer views an item in the frozen foods aisle at a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
Customers stand at check out counters after shopping inside a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
A Costco Wholesale warehouse location in Woodbridge, Virginia, January 5, 2016. AFP PHOTO / SAUL LOEB / AFP / SAUL LOEB (Photo credit should read SAUL LOEB/AFP/Getty Images)
Customers walk down an aisle inside a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
Kellogg Co. brand cereal bars are displayed for sale inside a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
Pineapples and other produce are displayed for sale inside a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
An employee pulls a cart full of tires past the cafe at a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
Employee Jordan Meinders sorts a display of books at a Costco Wholesale Corp. store in East Peoria, Illinois, U.S., on Tuesday, May 26, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release third-quarter earnings figures on May 27. Photographer: Daniel Acker/Bloomberg via Getty Images
Contract employees push sample carts through a Costco Wholesale Corp. store in Nashville, Tennessee, U.S., on Friday, Sept. 25, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release fourth-quarter earnings figures on September 29. Photographer: Luke Sharrett/Bloomberg via Getty Images
An employee pushes a row of shopping carts into a Costco Wholesale Corp. store in East Peoria, Illinois, U.S., on Tuesday, May 26, 2015. Costco Wholesale Corp., the largest U.S. warehouse-club chain, is expected to release third-quarter earnings figures on May 27. Photographer: Daniel Acker/Bloomberg via Getty Images
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