Costco (COST 1.01%) finished off 2023 with another stellar performance. The stock climbed nearly 45% amid renewed investor sentiment. This beat the 24% gain of the S&P 500.

As of this writing, shares of this top-notch retailer are priced at about $672. But bullish investors might have their sights set on the coveted $1,000 mark, which would translate to a near-50% gain.

Let's find out if Costco can reach this four-figure price by the end of 2024.

Costco is a wonderful company

There are lots of favorable attributes to this company. For starters, Costco runs a lucrative membership-based model, where customers pay $60 a year (for the standard plan) to have the ability to shop at one of the warehouse locations. This provides a high-margin, recurring revenue stream.

Even more importantly, offering memberships allows Costco to charge incredibly low prices on its merchandise assortment. In the most recent fiscal year (ended Sept. 3), the company reported a gross margin of 10.6%. This is much lower than other big retailers like Walmart, Home Depot, or Target. These low markups keep customers coming back.

These memberships also have proven pricing power. Management last raised the annual fee in June 2017. And there's lots of anticipation that a price hike will be implemented in the near term. With a worldwide renewal rate of 90.5% last quarter, Costco is likely to face minimal member churn.

The company has a wide economic moat that comes from scale advantages, and this makes it almost impossible for rivals to compete effectively. Costco generated $238 billion in merchandise sales in fiscal 2023, making it the world's third-largest retailer. This massive size gives the business negotiating leverage to acquire goods from suppliers at low per-unit costs, savings that are passed on to customers.

This creates a flywheel effect for Costco. More sales translates to better leverage versus suppliers, leading to ongoing savings for members. The business can constantly improve the customer value proposition over time.

It's not surprising that Costco has steadily been able to increase its top- and bottom-line figures. In the last 10 fiscal years, net sales rose at a compound annual rate of 8.7%, with diluted earnings per share increasing at an annualized clip of 11.8%. The business has been so successful financially that every few years, executives are able to pay a special dividend. Most recently, a $15 per-share payout was approved.

In both good and bad economic times, Costco continues finding ways to post strong business results. And this has put it on most investors' radars.

Why I'm still not betting on $1,000 per share

Based on what I've outlined above, anyone would agree that Costco is a fantastic business. But this doesn't mean investors should rush to buy shares just yet. Although the stock has historically rewarded investors, I don't think a 50% gain this year is likely. Moreover, I wouldn't be surprised if Costco shares lag the overall market in 2024.

The current price-to-earnings (P/E) ratio of 45.5, which is significantly higher than the trailing-10-year average and close to its all-time high, presents a major headwind for shareholders. For Costco's stock to reach $1,000 by year end with the multiple remaining constant, earnings per share would have to rise by 50%. This seems unlikely given how mature this business is. That type of rapid bottom-line growth just isn't in the cards anymore.

But I believe that Costco's P/E ratio could actually contract because of how expensive it is right now, and this creates downside risk for investors. Don't expect the $1,000 mark to be met in 2024. And for investors who are drawn to the business, it's best to practice patience and wait for a better valuation.