Following recent Costco (COST) management comments regarding the roll-out of membership card scanners at U.S. clubs, and the resulting lift in member sign-ups, Morgan Stanley tells investors that the firm’s channel checks suggest membership counts at selected Costco locations during the test phase, following implementation of card scanners, is rising by as much as low-double-digits given the significant conversion rates among previously non-fee-paying customers. The firm is not changing its estimates at this point, but believes faster membership growth should be an upside lever, even with “typical” reinvestment, and says the ongoing roll-out of membership card scanners “could soon deliver a Netflix moment” akin to the latter’s password-sharing crackdown. The firm keeps an Overweight rating and $950 price target on Costco shares.
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