Chipotle Shares Higher Following CLSA Upgrade To Outperform

The analysts separated two time horizons for their outlook: (1) short-term traffic recovery and (2) longer-term margin and growth algorithm concerns.

According to the analysts, their concerns on restaurant margins and store growth targets haven't changed, and they believe the traffic recovery will be the key growth driver for the stock in the short term.

Related Link: Dependence On Promotions Will Continue To Affect Chipotle's Pricing

The $460 price target is based on 30x FY18CL EPS, discounted at 8 percent. "We view FY18 as a more normalized operating environment. While our concerns over restaurant margins and store growth haven't changed, over the next 12 months, we believe traffic recovery is the headline that matters. We think Chiptopia and Charizo are the key catalysts," wrote CLSA.

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