Bulls, Bears Hungry For Chipotle
Two major Wall Street research firms weighed in on Chipotle Mexican Grill, Inc. (NYSE: CMG) on Thursday.
While Wunderlich is worried about the Avian Flu hurting the company and reiterated a Hold rating on the stock, Miller Tabak upgraded it to a Buy on growth potential and a recent pullback in Chipotle's stock price.
The Bull Case
Miller Tabak’s rating upgrade was accompanied by an increase in price target for Chipotle, from $715.00 to $725.00.
The analysts are expecting an average earnings growth of at least 25 percent through 2016, sustained by “the combination of mid-to-high-single-digit same-restaurant sales growth and a retreat in food costs—both of which we think will get a near-term boost from the return of pork system-wide.”
In addition, the stock price has fallen substantially over the past few months, opening an attractive entry point for investors.
The firm also likes Chipotle’s solid unit pipeline, the potential of its casual Asian concept, and its “ample cash position and robust free cash flow generation [which] will support increased buybacks.”
The Bear Case
Conversely, there’s Wunderlich, which is worried about the Avian Flu epidemic.
According to a recent article, analysts “cited commodity experts at the American Restaurant Association (ARA) who noted that further risks continue.
"The organization suggested that it may be ‘later rather than sooner’ before the egg market stabilizes as egg prices will remain volatility through the coming months and could rise by as much as 50 percent before year end.”
In addition, Wunderlich said poultry broiler and chicken wing prices could also be at risk later this fall. Although only 0.8 percent of birds that were destroyed so far are broilers, this number could rise. The ARA anticipates chicken wing prices will average $1.73 per pound for the year, approximately 17 percent higher than in 2014.
Among the companies that could be “most adversely affected by Avian Flu spreading to broiler chickens” is Chipotle; this is one of the reasons why the firm rates the stock a Hold.
Latest Ratings for CMG
|Oct 2016||Goldman Sachs||Maintains||Neutral|
|Oct 2016||Credit Suisse||Downgrades||Outperform||Neutral|
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