On Thursday, Oppenheimer adjusted its outlook on shares of Chipotle Mexican Grill (NYSE:CMG), reducing the price target to $65.00 from the previous $70.00. The firm maintained an Outperform rating on the stock. This recalibration comes in the wake of Chipotle's shares falling by 24.5% since mid-June, a stark contrast to the S&P's modest decline of 1.1% during the same period.
The market's reaction is partly due to expectations of softening same-store sales (SSS) in the second half of 2024 compared to the robust double-digit trends seen in the second quarter.
The company's third-quarter comparable sales have settled to a growth rate of about 6%, including what is considered best-in-class customer traffic, aligning closely with consensus estimates. Still, management's guidance for restaurant margins in the coming quarters is anticipated to fall below the forecasts of Wall Street analysts. This prompted Oppenheimer to lower its earnings per share (EPS) estimates for Chipotle by 4-5% through 2025.
Following a recent discussion with Chipotle's management, Oppenheimer believes that the revised margin expectations could potentially create a more favorable position for the company's shares moving forward. This sentiment is particularly relevant considering the recent decline in stock price.
The firm's revised price target of $65 reflects these updated estimates and Oppenheimer's position as more aggressive buyers at the current level of Chipotle's stock.
In other recent news, Chipotle Mexican Grill has seen several adjustments to its stock outlook following its Q2 2024 performance. Truist Securities reduced its price target from $74 to $69, maintaining a Buy rating. This change comes despite Chipotle surpassing expectations for same-store sales and earnings per share in Q2.
Loop Capital also revised its price target, cutting it from $58 to $53, but kept a Hold rating. This revision was influenced by Chipotle's Q2 earnings report, which reported a YoY increase of 18.2% in consolidated revenues, reaching $3 billion.
Piper Sandler adjusted its price target for Chipotle from $61 to $56, maintaining a neutral rating. The firm noted a slowdown in same-store sales growth in recent months. Similarly, Stephens reduced its price target from $64 to $61, maintaining an Equal Weight rating, citing potential margin pressures that could affect the near-term financial outlook.
TD Cowen adjusted its price target from $72 to $65, retaining a Buy rating, and noted Chipotle's efforts to standardize portion sizes at certain locations, which are expected to contribute to a 7% full-year comparable sales growth.
All these changes in analyst outlooks come in the wake of Chipotle's impressive Q2 performance, where the company reported a significant 18% increase in sales, reaching nearly $3 billion. The company also launched 53 new outlets, including 46 featuring the Chipotlanes concept, as part of its aggressive expansion strategy. These are the recent developments for Chipotle Mexican Grill.
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