Gold could be the new cash cow for Costco (NASDAQ:COST), according to five-star rated Wells Fargo analyst Edward Kelly. According to Kelly’s estimates, sales of the yellow metal could be brisk and “may now be running at $100 million to $200 million every month” for the wholesale retailer.
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This marks a rapid rise since Costco began selling gold last year. The analyst added that customers have shown significant interest in the big-box retailer’s gold sales, thanks to an aggressive pricing strategy and strong customer trust in the retailer.
Kelly added that sales of bullion at Costco have received a further boost from increasing Reddit posts, and rapid online product sell-outs.
According to a CNBC report, Costco is offering nearly pure 24-karat gold (NYSEARCA:GLD) bars, weighing one ounce, priced at 2% above the current spot price. Considering this pricing and gold spot prices surging by more than 13% from the start of this year, Costco is poised to benefit significantly from gold sales.
Even with this upbeat outlook about COST’s sales of the yellow metal, Kelly remains sidelined about the stock with a Hold rating and a price target of $750 on the stock. The analyst’s price target implies an upside potential of 4.3% from current levels.
Is COST Stock a Buy or Sell?
Analysts remain bullish about COST stock, with a Strong Buy consensus rating based on 20 Buys and six Holds. Over the past year, COST has surged by more than 45%, and the average COST price target of $777.08 implies an upside potential of 8.1% from current levels.
