Argus Turns Bullish On Chipotle, Sees Upside To $550 Per Share

Chipotle Mexican Grill, Inc.CMGfirst-quarter earnings report, which supports its bullish case.

Q1 And Analyst's Take

Argus' John Staszak upgraded Chipotle's stock from Hold to Buy with a $550 price target as the company's first-quarter earnings reported showed a "strong recovery" in comp sales and earnings. The analyst suggested that the momentum seen in the recent quarter could continue moving forward due to new marketing campaigns, a differentiated menu offering, unit expansions and a strong balance sheet.

In fact, Staszak believes Chipotle could grow its business at a faster pace compared to the overall restaurant industry. Specifically, the analyst is estimating Chipotle's revenue to rise 18 percent in 2017 to $4.6 billion on a high single-digit increase in same-store sales and 200 new store opens. In 2018 revenue is expected to increase another 13 percent to $5.2 billion.

The analyst also believes the food safety issue, which plagued its stock and reputation in 2015 and 2016, has passed.

Finally, Staszak noted a revision to his 2017 and 2018 estimates are necessary given his positive view. For 2017, the company is now expected to earn $9.00 per share (versus a prior estimate of $8.50 per share) and $12.50 per share in 2018 (versus a prior estimate of $12.00 per share).

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