SunTrust: Chipotle's SSS Recovery 'Will Start...Now!'

SunTrust Robinson Humphrey issued a company report on Chipotle Mexican Grill, Inc. CMG after the company reported 4Q15 earnings. Currently, analysts at SunTrust Robinson Humphrey rate Chipotle as a Buy while lowering their price target from $544 to $520. Jake Bartlett, an analyst at SunTrust Robinson Humphrey, wrote, "Over shadowing its 4Q EPS beat, CMG disclosed weak January SSS (-36 percent) and guided '16 G&A far above our estimate (+26 percent Y/Y). While we are disappointed to lower our EPS estimates once again, we expect the stock to trade with SSS trends….we are heartened as CMG takes bold steps to reignite sales, including spending 6 percent of sales on marketing/promotion (4x the typical level)." SunTrust gave two key takeaways on why they see strength in Chipotle's stock going forward: 1. Top line growth While Chipotle reported lower than expected margins of 19.6 percent, analysts at SunTrust believe that credit card data may show that Chipotle's food remains in high demand, which has the potential to drive positive sediment regarding top-line growth. Furthermore, analysts believe that CMG's all-employee meeting on February 8th will drive confidence in their food products and potentially increase traffic in the stores. 2. Aggressive promotional efforts Analysts noted that Chipotle expects to spend 6 percent on marketing, particularly in mobile platforms to reach a younger audience. These efforts can both increase sales and drive increased profit margins for the company while also allowing them to drive same-store sales growth. Currently, Chipotle is trading at $460.80, down 3.13 percent.