Will Costco Stock Split Soon?

Big box giant Costco (NASDAQ:COST) has been one of the most successful retail stocks of recent years. In the last ten years, COST shares have appreciated by over 600% and the stock hovers much closer to $1,000 per share than $100 per share.

These prices beg the question of whether Costco is due for a stock split. By dividing its stock on a 10-for-1 or 20-for-1 basis, Costco could bring share prices down to more ordinary levels, entice retail investors and potentially make it easier for longtime shareholders to liquidate part of their holdings.

Is Costco going to split its stock soon, or will management keep letting shares move higher?

A Look at Costco’s Split History

Some companies avoid splitting their stocks at practically all costs, preferring instead to allow shares to appreciate to astronomical heights. The most prominent example of this is Berkshire Hathaway, whose Class A shares are now worth over $650,000 apiece.

Costco, however, doesn’t fit so neatly into this category of companies. In fact, the retailer has split its stock twice in its corporate history.

The first split occurred in 1993, followed by another in 2000. In both cases, each existing share of Costco was replaced with two new shares.

Since 2000, though, the company has allowed its stock to keep rising as its revenues and earnings have steadily grown.

Why Might Now Be the Time for a Costco Split?

The most obvious case for Costco splitting its shares is the high price of the stock. At well over $800 per share, retail investors and Costco’s own employees may have a hard time buying full shares, a situation that often foreshadows a split.

By splitting its shares, Cosco could make ownership more affordable and increase the market liquidity of its stock.

It’s also worth noting that several other large, prominent companies have recently undergone stock splits in order to make their shares more affordable. The most notable example is Chipotle, which divided its stock in a dramatic 50-for-1 split that was completed in June.

NVIDIA has responded to its soaring share prices with two splits since 2021, including a 10-for-1 split earlier this year. Other prominent companies that have divided their stocks include Broadcom, Cintas and Sony.

Perhaps the most similar stock to Costco that has undergone a recent split, though, is Walmart. The retailer announced a 3-for-1 split in January that was executed in February.

In its announcement, Walmart’s management highlighted the company’s employee stock purchase program as a major driver for the decision. Lower share prices, it reasoned, would increase the ability of Walmart employees to invest in whole shares and benefit from the stock’s continued appreciation.

This rationale would also seem to hold true in Costco’s case. Like many large companies, Costco offers an employee stock purchase program that makes it simple for employees to gain ownership in the company.

In the last full fiscal year, Costco spent about $774 million on stock-based compensation. Though a split wouldn’t change these numbers, it would increase the ability of Costco’s employees to buy full shares in the company by withholding money from their paychecks.

A final case for Costco pursuing a stock split is the fact that share prices only appear likely to keep climbing in the future.

In the next 3-5 years, analysts foresee earnings per share to grow by about 9.2% annually. This will likely drive shares up to higher levels, and it’s far from impossible that COST shares could break the $1,000 mark in the coming few years.

In fact, the most bullish analyst estimates suggest that that threshold could be reached in the next 12 months. Though this view on the stock is likely too optimistic, it’s clear that Wall Street expects Costco to keep climbing for the foreseeable future.

Will Costco Stock Split Soon?

It’s unlikely that Costco stock will split soon based on management’s reluctance even though the share price is well above levels when it previously split.

Although stock splits are becoming more popular among large businesses and there are good reasons for Costco to divide shares, it’s also worth considering that the company hasn’t shown much interest in pursuing one.

Shares have long since surpassed the prices they reached before the last split in 2000, and management hasn’t made any serious moves toward dividing shares again.

Costco has also resisted stock splits during past spates of them in the corporate world. In 2022, for instance, Amazon, Alphabet and Tesla all split their stock. At that time, Costco shares had already broken $500, but the company showed no interest in following along with the trend.

The same has held true so far in 2024, even though Costco is up more than 30% YTD.

There is also no real pressure on Costco to divide its shares at the moment. Nearly 70% of the company is owned by institutional investors whose ownership stakes won’t be affected by splitting the stock into more shares.

Other companies have allowed their stocks to run far beyond $1,000 before deciding to split. Chipotle shares, for instance, reached over $3,000 by the time the split actually took place.

Along these same lines, it’s worth noting that Costco is far from the most expensive stock in the American market at the moment. In addition to the extreme example of Berkshire Hathaway, there are other stocks with four-digit price tags that haven’t split their shares.

Consider, for example, Autozone (NYSE:AZO). This stock currently trades at $2,950 per share and hasn’t undergone a split since 1994. Clearly, there’s still room left for Costco shares to run before management would likely feel compelled to announce a split.

In the end, a stock split for Costco is a serious possibility at some time in the next several years. Investors, though, probably shouldn’t bank on one happening immediately.

Whether Costco does or doesn’t split its stock, however, the company appears to still be a good growth play in the retail sector. As such, it’s likely a stock with the potential to generate ongoing returns for investors irrespective of an eventual split.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.