Market Overview

Chipotle's Turnaround Is 'Underway,' But Stephens Is Neutral Until Traffic Improves

Share:
Chipotle's Turnaround Is 'Underway,' But Stephens Is Neutral Until Traffic Improves

Fast casual food chain Chipotle Mexican Grill, Inc. (NYSE: CMG) reported first-quarter results Wednesday that confirmed a turnaround is "underway," but now is not the time to buy the stock, according to Stephens.

The Analyst

Stephens' Will Slabaugh maintains an Equal-Weight rating on Chipotle Mexican Grill with a price target lifted from $285 to $350.

The Thesis

Chipotle's adjusted EPS of $2.13 was "easily ahead" of Slabaugh's estimate of $1.81 per share, which the company attributed to lower marketing costs and cost of sales that offset a higher tax rate, the analyst said in a Thursday note. Stephens is attributing the encouraging top-line print to a "fairly aggressive" menu price increase of 4.9 percent that helped counter a 3.3-percent decline in traffic.

Chipotle also benefited in the quarter from continued contributions from queso and, to a smaller degree, the company's growth in initiatives including digital, delivery and catering, Slabaugh said. Recently appointed CEO Brian Niccol offered a glimpse of his vision to turn around the restaurant brand, which Slabaugh said is "encouraging" in the long term. 

Chipotle did see declining traffic in the quarter, which should keep investors "somewhat concerned" with traffic trends moving forward, Slabaugh said. The chain must show signs of improving traffic before investors can become "more positive" on the stock, he said.

Price Action

Shares of Chipotle Mexican Grill were soaring by 18.5 percent at the time of publicatino to $402.51. 

Related Links:

Making Sense Of A $500 Price Target On Chipotle Shares

Stifel Sees Reboot Opportunity For Chipotle, Upgrades From Sell To Hold

Photo courtesy of Chipotle. 

Latest Ratings for CMG

DateFirmActionFromTo
Jul 2019Initiates Coverage OnBuy
Jul 2019MaintainsBuy
Jul 2019MaintainsUnderperform

View More Analyst Ratings for CMG
View the Latest Analyst Ratings

Posted-In: Brian Niccol fast casual foodAnalyst Color Price Target Reiteration Restaurants Analyst Ratings General Best of Benzinga

 

Related Articles (CMG)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
GMLPReiterates10.0
JWNReiterates29.0
DSGXInitiates Coverage On43.0
ZMAssumes115.0
LOGMAssumes77.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

7 Biggest Price Target Changes For Thursday

House Bill Would Change How Pandora, Spotify And Others Pay Royalties