Services

Is Chipotle Still a Stock to Buy After Tripling Off March Lows?

Chipotle Mexican Grill Inc. (NYSE: CMG) reported its most recent quarterly results earlier this week, and analysts have had a chance to digest them. The price action and recovery of this stock since the onset of the pandemic last year has been incredible, but is the run over? The question on many investors’ minds is whether this stock is still worth buying at nearly a record high and after weak fourth-quarter results.

The burrito chain recently posted $3.48 in adjusted earnings per share (EPS) on $1.60 billion in revenue. That compared with consensus estimates of $3.73 in EPS and revenue of $1.61 billion, as well as with earnings of $2.86 per share and $1.44 billion in revenue posted in the same period last year.

During the most recent quarter, comparable restaurant sales increased by 5.7%. Those sales were fairly consistent in each month of this quarter due to a combination of factors, including healthy demand for Carne Asada, strength in digital sales and the benefit of a delivery menu price increase. Comparable restaurant sales began to improve toward the end of December, and this trend has continued, with January comparable restaurant sales growing around 11%.

At the same time, digital sales grew 177.2% in the quarter and accounted for 49.0% of sales in the period.

Restaurant-level operating margin was 19.5%, an increase from 19.2% in the fourth quarter of 2019. The improvement was driven primarily by leverage from the comparable restaurant sales increase, menu price increases and lower avocado pricing.

Food, beverage and packaging costs in the third quarter were 31.0% of revenue, a slight decrease from the same quarter of last year. The decrease was due primarily to the benefit of menu price increases, along with better waste control and a more favorable protein mix, partially offset by fewer sales of high-margin beverages and higher dairy pricing.

Overall, the results from this quarter were relatively strong, although the top-line and bottom-line numbers did not compare well with the consensus estimates. Analysts seemed to take a similar approach when assessing the stock as well. While many were somewhat neutral on the stock, a handful were very optimistic. Note that the stock is up about 69% in the past 52 weeks and that it has more than tripled off of its lows set back in March 2020.

Here’s what analysts had to say:

  • UBS Group reiterated a Neutral rating but increased its price target to $1,575 from $1,500.
  • Deutsche Bank reiterated its Hold rating and raised its price target to $1,437 from $1,348.
  • Loop Capital reiterated it as a Buy and raised its target price to $1,800 from $1,600.
  • BMO Capital Markets reiterated it at Market Perform and raised its target from $1,200 to $1,415.
  • Morgan Stanley reiterated an Equal Weight rating.
  • Credit Suisse reiterated it at Outperform and raised its price target to $1,760 from $1,700.
  • Tesley Advisory Group reiterated a Market Perform rating and raised its target from $1,350 to $1,600.
  • Wedbush reiterated an Outperform rating and raised its price target to $1,800 from $1,600.
  • Barclays reiterated it as Equal Weight and raised its target price to $1,450 from $1,344.
  • Cowen reiterated an Outperform rating and raised its price target to $1,900 from $1,640.
  • Stephens reiterated it at Equal Weight and raised its price target to $1,450 from $1,265.

Chipotle Mexican Grill stock traded up fractionally early Thursday, at $1,507.64 in a 52-week range of $415.00 to $1,553.55. The consensus price target is $1,636.86.