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.
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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