Chipotle's Q2 Growth Is Influenced By Menu Innovation And Stable Labor Costs, Analyst Predicts Accelerated Market Share Gains

Wedbush analyst Nick Setyan reiterated an Outperform rating on the shares of Chipotle Mexican Grill Inc CMG and raised the price target from $2,200 to $2,300.

The analyst expects CMG's Q2 same-store-sales growth to be in-line or slightly above the 7.4% consensus.

The analyst said a sales lift from the chicken al pastor LTO and more seasoned staff are the factors that aid in the SSS growth.

The analyst continues to view menu innovation, loyalty/digital, throughput, and marketing spend growth as ongoing drivers of SSS growth.

Also, with no plans to increase prices for the remainder of this year and a 2H LTO that's unlikely to underperform last year's Garlic Guajillo Steak, the analyst views the current Q3 consensus transaction growth estimate of 3.5% and the Q4 estimate of 4.2% as conservative.

With stable labor costs and a stable-to-down delivery mix outlook, the analyst expects comparable upside to flow through.

The analyst's 12-month PT represents a 41.8x multiple, net of cash, on 2024 EPS estimate, a 10% premium to CMG's pre-COVID 10-year median forward P/E of 37.8x.

The analyst believes CMG is poised to see accelerated market share gains in a post-COVID environment, resulting in sustained growth above pre-COVID levels.

Price Action: CMG shares are trading higher by 1.53% at $2,081.26 on the last check Wednesday.