JPMorgan Adds Chipotle To Focus List, Removes Yum!

JPMorgan’s John Ivankoe removed Yum! Brands, Inc. YUM from their Analyst Focus List, recommending investors to accumulate shares at prices lower than ~$80. Instead, the analyst added Chipotle Mexican Grill, Inc. CMG to the Analyst Focus List, saying that the current share price offered an attractive entry point.

Weaker China Comps In Store

Yum’s KFC and PHCD China comps for 2QF16 were “talked down on the conference call,” analyst John Ivankoe said, while adding that they face tougher comparisons. The company indicated that the quarter’s first six weeks were tracking “slightly positive” for KFC and PHCD comps remained double-digit negative.

Ivankoe lowered KFC comps estimate from 8 percent to 2 percent, and PHCD comps estimate from -10 percent to -14 percent.

Yum Brands

JPMorgan maintained an Overweight rating for the company, with a price target of $85. “Fundamental inflection is expected in China as management is willing to consider an accretive transaction breaking up the YUM ex-China and the YUM China businesses,” the analyst commented. He added that such a transaction relative implied a significant intrinsic value relative to the current share price.

Chipotle

JPMorgan maintained an Overweight for the company, with a price target of $510. Ivankoe mentioned that the current share price represented attractive risk/reward. Chipotle is expected to generate 20 percent EPS growth in FY18-FY20, and the new unit AUVs and total AUVs are likely to reach the FY14 levels in FY20.