Market Overview

Morgan Stanley Turns Bullish On Chipotle, Says Earnings Recovery Is Real

Morgan Stanley Turns Bullish On Chipotle, Says Earnings Recovery Is Real
Related CMG
Q3 13F Roundup: How Buffett, Einhorn, Ackman And Others Adjusted Their Portfolio
10 Biggest Price Target Changes For Tuesday
Tracking Bill Ackman's Pershing Square Portfolio - Q3 2018 Update (Seeking Alpha)

Fast casual restaurant chain Chipotle Mexican Grill, Inc. (NYSE: CMG) is undergoing a compelling earnings recovery story led by a new management team, according to Morgan Stanley. 

The Analyst

Morgan Stanley's John Glass upgraded Chipotle Mexican Grill from Equal-weight to Overweight with a price target lifted from $413 to $600.

The Thesis

The bullish case for Chipotle's stock can now be made for three reasons, Glass said in the upgrade note. (See the analyst's track record here.)

They are: 

  • Recently appointed CEO Brian Niccol said the company should see accelerating top-line growth from a rapid pace of new menu items, limited-time offers, improvements in throughput and digital opportunities including food delivery and loyalty programs, Glass said. 
  • Niccol is also focused on store-level improvements, including a second make line, which is a less labor-intensive production area, the analyst said. This alone could contribute more than 100 basis points of labor benefit over time and food cost benefits, he said. 
  • Investors face a shortage of growth stocks within the consumer discretionary space, which implies a higher multiple for a stock in its early stages of an earnings recovery can be tolerated, Glass said. Consensus estimates for 2019, which include a forecast for less than 4-percent same-store sales growth, are not "overly demanding," and less than one-third of Street analysts are currently recommending the stock.

Price Action

Chipotle shares were trading up 3.79 percent off the open Wednesday to $512.02. 

Related Links:

Chipotle's Stock Surge Is Thanks To Its New CEO

Chipotle Has A New Game Plan: Is Wall Street On Board?

Photo courtesy of Chipotle.

Latest Ratings for CMG

Oct 2018CitigroupMaintainsBuyBuy
Oct 2018Wells FargoMaintainsMarket PerformMarket Perform
Oct 2018BarclaysMaintainsEqual-WeightEqual-Weight

View More Analyst Ratings for CMG
View the Latest Analyst Ratings

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


Related Articles (CMG)

View Comments and Join the Discussion!

Latest Ratings

CPAImperial CapitalDowngrades68.0
PRMWImperial CapitalInitiates Coverage On18.0
TGTKeyBancInitiates Coverage On110.0
QCOMMorgan StanleyUpgrades0.0
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.

10 Biggest Price Target Changes For Wednesday

How Traders Are Treating The Turkey ETF