Will $6 gas in California send Costco stock ripping higher?

Sales and nett lifts to Costco (COST) from surging state prices whitethorn already beryllium pumped into the retailer's banal price.

Since the commencement of Operation Epic Fury connected Feb. 28, Costco banal has gained 1% — outperforming the S&P 500's (^GSPC) 8.2% drop. The comparative outperformance reflects investors rallying astir a simple, two-part thesis connected Costco.

First, spiking state prices nonstop radical to Costco for the cheapest imaginable gas, which successful crook sends them into a Costco store for the cheapest imaginable groceries.

Second, astir 26% of Costco's income travel from California, wherever state prices person soared to $6 per gallon, connected average, the highest successful the country.

Costco operates state stations astatine the bulk of its 640-plus US warehouses.

Read more: How lipid terms shocks ripple done your wallet, from state to groceries

Hardly anyone connected Wall Street disputes that Costco is experiencing a large income assistance close now, which is apt to amusement up soon successful the merchandise of March sales.

What the Street is trying to fig retired is if Costco's banal already reflects the marketplace stock assistance from a much uncertain user spending backdrop.

"A communicative calling for a P&L payment from the caller 30% emergence successful state prices, portion historically accurate, is wide anticipated by investors and has manifest itself successful S&P 500 comparative outperformance," longtime Costco banal watcher and Guggenheim expert John Heinbockel said successful a enactment connected Tuesday. "Already industry-leading top-line momentum is expected to person an incremental boost from consumers’ accrued pursuit of value."

Heinbockel projects a beardown 10% income maturation for Costco successful March and "even stronger" results successful the adjacent fewer months.

The expert offered up immoderate humanities discourse connected Costco and rising state prices.

"In the outpouring of 2022, the Ukraine struggle drove a 43% summation successful retail state prices, from $3.56 to $5.09, a overmuch steeper ramp to a higher terminal level than we person witnessed frankincense far," Heinbockel said. "Despite this incremental imaginable unit connected consumers, near-term operating momentum improved. Two-year gallon maturation accelerated ... portion merchandise class momentum picked up by 200-300 ground points across-the-board. The rationale: if households are spending an incremental $250 per period to capable state tanks, COST's terms leadership, including Kirkland Signature, carries large significance."

Heinbockel maintained a Neutral standing connected Costco's stock. Wall Street is much bullish connected the shares, according to Yahoo Finance data.