On Wednesday, TD Cowen reiterated its confidence in Chipotle Mexican Grill (NYSE:CMG) shares, maintaining a Buy rating on the stock. The approval comes as Chipotle begins trading on a 50-to-1 split adjusted basis. The company adjusted the price target to 50:1.
The firm adjusted the price target to $72, a change that reflects the recent split, down from the previous target of $3,600. The recalculated price target is based on approximately 50 times the adjusted earnings per share (EPS) forecast for the next fiscal year.
The price target adjustment to $72, from $3,600 prior to the split, is a direct result of the split and does not indicate a change in the company’s outlook. TD Cowen’s valuation is based on the belief that Chipotle can again reach the high multiples achieved several times in the years 2020-2021. The company’s analysis suggests that the stock’s potential is supported by several key factors that contribute to its optimistic outlook.
TD Cowen’s optimism about Chipotle is based in part on the anticipation of positive customer traffic in 2024, which is expected to be a rarity in the restaurant industry. Additionally, the company cites Chipotlane’s near-peak new store economy, which currently hovers around 65%, approaching pre-2015 levels of 70%-80%. This figure is considered a strong indicator of the company’s profitability and efficiency in opening new locations.
The company also indicates a clear trajectory for Chipotle to return to the high end of its growth goal of 8%-10% new stores by 2025. This growth expectation is a significant factor in the company’s valuation and supports maintaining the Buy rating. TD Cowen’s price target and outlook adjustments take into account the stock split only and reflect a consistent view of the company’s financial outlook.
In other recent news, Chipotle Mexican Grill has made great strides in its corporate journey. The company recently completed a sizable 50-for-1 stock split, with the goal of broadening its investor base and making stock ownership more accessible. As a nod to its workforce, Chipotle announced a one-time grant for all restaurant general managers and staff members with more than two decades of service.
The company’s financial results were strong, with a 7% increase in comparable sales and total revenue of $2.7 billion for the first quarter. Digital sales accounted for 37% of this total. Additionally, Chipotle plans to open 285-315 new restaurants this year.
Amid analyst action, Argus raised its price target on Chipotle shares to $3,888, citing the company’s strong financial position and effective mobile ordering and delivery platforms.
Goldman Sachs initiated coverage on Chipotle with a Buy rating and a $3,730.00 price target, noting the company’s potential to increase average unit volume and scale its business efficiently. Truist Securities also raised its price target on Chipotle shares to $3,520, while slightly lowering its earnings estimates for the company.
Finally, the New York Stock Exchange is currently investigating a technical issue that has caused several NYSE-listed stocks, including Chipotle, to temporarily halt trading. These are the recent developments affecting Chipotle Mexican Grill.
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