Wedbush Raises Target On Chipotle From $620 To $740
- Chipotle Mexican Grill, Inc. (NYSE: CMG) stock has been on a downtrend, after having peaked at $757.77 in the first week of August.
- Wedbush’s Nick Setyan has maintained a Neutral rating on Chipotle, while raising the price target to $740 from $620.
- Checks indicate same-store sales growth reacceleration in August, with BOGO driving comp upside in the near term, although there is lack of evidence of the sustainability of transaction growth.
Wedbush analyst Nick Setyan said recent checks indicate same-store sales growth reacceleration so far in Q3, ahead of the consensus expectations of 2.5 percent: “We estimate a 4-5% trend-line through mid-August.”
The main growth driver was the BOGO, or buy one, get one free, coupon mailer and online promo. Setyan added, however, that same-store sales growth could begin to moderate in the back half of the quarter, as the impact of the BOGO promo wanes. Nonetheless, the Q3 comp estimate has been raised to 3.5 percent from 2.5 percent.
In the report Wedbush noted that while BOGO was a near-term driver, there was lack of clarity into the “drivers of upside relative to medium-term expectations.”
“Even assuming no further Colorado penetration, we estimate CMG’s unit opportunity at 4.4K at CO’s penetration rate in the U.S., and another 1K from Canada and the UK…Given continued new unit strength, we see no deceleration in CMG’s current double-digit unit growth rate, with a runway at least a decade long,” Setyan wrote.
The EPS estimate for 2015 has been raised from $17.34 to $17.42 to reflect higher Q3 same-store sales growth. The EPS estimate for 2016 has been raised from $20.04 to $20.67 to reflect higher margin assumptions.
Latest Ratings for CMG
|Oct 2016||RBC Capital||Maintains||Outperform|
|Oct 2016||Raymond James||Downgrades||Market Perform||Underperform|
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