Rising food costs, rising menu prices and store growth were the big topics highlighted by analysts who cover the restaurant company Chipotle Mexican Grill, Inc. GCM. Here are the main conclusions of the analysts.
Chipotle analysts: Morgan Stanley analyst John Glass had an overweight rating and raised the price target on Chipotle from $1,903 to $1,904.
Raymond James analyst Brian Vaccaro had an outperform rating and price target of $1,850.
Wedbush analyst Nick Setyan had an outperform rating and a price target of $2,000.
KeyBanc analyst Eric Gonzalez had an overweight rating and a price target of $1,900.
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The analyst’s takeaways: Morgan Stanley’s Glass called Chipotle one of the few companies able to “navigate the current cost environment” in an updated note on the restaurant business.
“Against concerns that forward margin estimates were too aggressive, and the reverse is likely true, giving room for an upside estimate — a rare thing in restaurants these days,” Glass said.
While food costs and overall costs hurt margins in the first quarter, the analyst pointed out that several of these items have been normalizing recently.
Better-than-expected comparable sales were a key driver for Chipotle’s Raymond James Vaccaro in the first quarter.
“Management emphasized that they continue to see little resistance to recent menu price increases and that the 2Q comparison guide implies average unit volumes,” Vaccaro said.
The analyst noted that the average unit volume forecast is post-COVID-19 highs. The company’s pricing advantages help combat rising food costs.
Chipotle’s growth could come from increased menu prices, menu innovation and increased loyalty memberships, Wedbush’s Setyan said.
“We believe CMG is poised to see accelerated market share gains in a post-COVID environment, driving sustained growth above pre-COVID levels,” Setyan said.
The analyst pointed out that the company reported 48 net new units opened in the first quarter and forecast annual growth of 8% to 10%.
KeyBanc’s Gonzalez said Chipotle was able to handle rising food costs in the future, but he’s cautious about the company’s menu mix.
“While traffic is expected to remain positive as y/y comparisons ease, average inbound/orders will weigh on the mix as customers shift away from delivery to foodservice and delivery channels,” Gonzalez said. .
CMG Price Action: Chipotle shares rose 2.60% to $1,475.63 on Wednesday at the market close.
Photo: Courtesy of Chipotle