Chipotle Is Ready To 'Guac & Roll'

Buckingham Research analyst John Zolidis initiated his coverage on Chipotle Mexican Grill, Inc. CMG with a Buy rating and established a $547 price target. He listed four main factors for the upgrade.

The first is that Chipotle is under-earning. The second is that customers would finally return to the company, as the analyst is cautious on the current quarter. The third factor is the model that historically generated a very strong FCF that the company is using to buy back shares aggressive at just the right time. The final factor is that current levels presented an opportunity.

"While we have no illusions that the current quarter will not be good (we are expecting a 20% decline in SSS) we believe that ultimately CMG will recover its consumer appeal, higher sales and margins. We believe the positive inflection in key performance metrics will lead investors to again focus on the long-term opportunity and investors should buy the stock ahead of this event," Zolidis wrote in his note to his clients on the company.

The brokerage sees 63 percent upside and 8 percent downside in his best/worst case scenarios. The analyst believes the company is under-earning. Zolidis said his investment discipline favored long investments in companies that have 1) high absolute returns, 2) rising returns, or 3) are structurally under-earning.

On Thursday, shares traded up about 1 percent at $393.55 following the upgrade.

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Posted In: NewsPrice TargetInitiationRestaurantsAnalyst RatingsGeneralBuckingham ResearchJohn Zolidis
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