Market Overview

Analyst Likes Chipotle's New CEO, Upgrades Stock To Buy

Analyst Likes Chipotle's New CEO, Upgrades Stock To Buy
Related CMG
McDonald's, Restaurant Brands, Chipotle Are Morgan Stanley's Top Restaurant Picks In Challenging Year For Sector
The Best And Worst Stocks Of 2018

Casual fast-food restaurant chain Chipotle Mexican Grill, Inc. (NYSE: CMG), under the leadership of a new executive team led by CEO Brian Niccol, remains on track for a multi-year long recovery, according to Argus.

The Analyst

Argus' John Staszak upgraded Chipotle from Hold to Buy with a new $540 price target.

The Thesis

Chipotle's recently appointed CEO brings the necessary leadership to spur accelerating same-store sales and earnings growth over the coming years, Staszak said in a note. The executive will likely see success through digital offerings like online ordering and mobile payments, new menu offerings, a greater push into catering and deliveries, and an effective marketing program. The multiple initiatives is intended to attract more low-income and middle-income consumers, which in turn will increase its overall market share.

Niccol is also focusing on re-establishing Chipotle "formerly strong brand" at a time when it's slowing down its expansion plans from 183 new restaurants last year to 130-150 new units this year, the analyst wrote. The company's $232 million in cash and cash equivalents (with no long-term debt) will be used to fund its unit expansion, which also implies a dividend payout to investors is unlikely.

Chipotle's stock at current levels fails to value the company's prospects for growing same-store sales and earnings growth at 40.9x 2019E EPS. Staszak said this is below the midpoint of the stock's 10-year annual average of 16x to 76.

Price Action

Shares of Chipotle were trading higher by more than 1 percent early Wednesday morning after closing at $426.56.

Related Links:

Chipotle's Q1: The Wall Street Reaction

Chipotle CEO Says Top Priority Is To Remind People 'Why They Love' The Fast Casual Restaurant

Image credit: Chis Potter, Flickr

Latest Ratings for CMG

Jan 2019Loop CapitalReiteratesBuyBuy
Jan 2019Maxim GroupDowngradesBuyHold
Jan 2019Wells FargoMaintainsMarket PerformMarket Perform

View More Analyst Ratings for CMG
View the Latest Analyst Ratings

Posted-In: ArgusAnalyst Color Upgrades Price Target Restaurants Top Stories Analyst Ratings General Best of Benzinga


Related Articles (CMG)

View Comments and Join the Discussion!

Latest Ratings

CNPRBC CapitalUpgrades34.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
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.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Zoetis To Buy Abaxis In $2 Billion Deal

KeyBanc Highlights Tencent And JD Concerns In Vipshop Downgrade