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UPDATE: Belus Capital's Sozzi Upgrades Chipotle to Buy, Wants Investors to Chow Down on Shares


Belus Capital's Brian Sozzi upgraded shares of Chipotle Mexican Grill, Inc. (NYSE: CMG) from Hold to Buy in a research note Wednesday morning. The analyst raised his price target from $500.00 to $600.00.

Sozzi's note follows fourth-quarter results from Chipotle on January 30th. The analyst highlighted an attractive PE multiple and call action which is signaling the stock is "destined to hit $1,000," arguing "Chipotle is in the good graces of Wall Street, deservedly so."

The Belus Capital analyst cited a number of near-term and longer-term fundamental justifications for the Street's optimism. Sozzi sees strength today due to:

  1. increasingly quicker line throughput (during peak times people are getting onto, and off of, the line faster);
  2. intensely positive customer response to new restaurant locations (could see this via photos on a Chipotle keyword search on Twitter); and
  3. a switch to a non-GMO menu that in our view has begun to already appear in same-restaurant sales (people feel better about eating at Chipotle and share with others, personally or on social media, that positive experience).

Sozzi sees strength in the future due to:

  1. an accelerated pace of domestic new Chipotle openings;
  2. a careful introduction of new menu items (sofritas; we expect some form of broader breakfast platform in short older);
  3. the start of a restaurant remodeling campaign to stay fresh and relevant, and capture more of the post-work crowd;
  4. a high probability of a menu price increase of 3%-5% by mid-2014 that bolsters same-restaurant sales and more than counteracts food inflation and ingredient (GMO initiative) investment;
  5. new concepts are being rolled out thoughtfully as to preserve the cultural element that has made Chipotle successful; and
  6. investments in mobile payment that will further speed up throughput.

Chipotle shares are trading up about 0.3 percent to $546.50 ahead of the opening bell. Sozzi's new price target represents potential upside of about 10 percent from where the stock is currently trading.

Latest Ratings for CMG

Jul 2020Credit SuisseMaintainsOutperform
Jul 2020Piper SandlerMaintainsOverweight
Jul 2020B of A SecuritiesMaintainsNeutral

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