On Tuesday, Truist Securities revised its price target for Chipotle Mexican Grill (NYSE:CMG), nudging it up to $71.00 from $69.00, while reiterating a Buy rating on the stock. The adjustment comes in light of anticipated sales outperformance for the third quarter of 2024.
The firm's analysis, based on Truist Card Data, suggests that Chipotle's third-quarter sales could reach $2.84 billion, which is 1.0% higher than the consensus estimate. This projection includes a same-store sales (SSS) increase of 6.1%. Truist's own estimate is even more optimistic, with a 7.0% SSS growth, revised up from the previous 6.0%.
According to the analyst, year-over-year growth for Chipotle seemed to gain momentum as the quarter progressed. The introduction of the 'Smoked Brisket' item on September 10 significantly contributed to this uptrend by attracting more customers and increasing the average transaction amount. This product launch is believed to set the stage for continued solid SSS growth into the fourth quarter of 2024, estimated at 5.5%, despite more challenging year-over-year comparisons.
Alongside the SSS forecast increase for the third quarter, Truist anticipates that more modest commodity inflation will help bolster profit margins. Reflecting these factors, the firm has raised its earnings per share (EPS) estimate for the third quarter to $0.26, up from the prior estimate of $0.24, and above the consensus of $0.25.
The revised price target of $71 reflects these updated estimates, marking a slight increase from the previous target. The ongoing positive sales trends and the expected margin support play key roles in this updated valuation of Chipotle's stock.
In other recent news, Chipotle Mexican Grill has experienced significant developments, including a series of executive changes and strategic pricing adjustments. Analysts from Bernstein SocGen Group have maintained an Outperform rating on Chipotle, citing strong sales trends and potential of its Smoked Brisket product.
Piper Sandler raised its price target for Chipotle ahead of its third-quarter earnings report, maintaining a Neutral rating. The company has also implemented several executive changes, including the promotion of Adam Rymer to Chief Financial Officer and the appointment of Jamie McConnell as Chief Accounting and Administrative Officer.
KeyBanc reiterated its Overweight rating on Chipotle, noting an increase in prices for its Smoked Brisket at approximately 77% of its locations. Citi maintained a Buy rating on Chipotle stock, highlighting the multi-year benefit from throughput initiatives, positive feedback on limited-time offerings, and sustained confidence in technology initiatives. Oppenheimer has also maintained an Outperform rating on Chipotle, suggesting potential for outperformance against market expectations through 2025.
Despite recent management changes and uncertainties, Goldman Sachs reiterated its Buy rating on Chipotle. Firms such as William Blair, Baird, and Wedbush have maintained their Outperform ratings for Chipotle, expressing confidence in the company's future.
InvestingPro Insights
Chipotle Mexican Grill's strong market performance aligns with Truist Securities' optimistic outlook. According to InvestingPro data, the company's revenue growth of 14.85% over the last twelve months and an impressive 18.22% in the most recent quarter underscore its robust sales trajectory. This growth trend supports Truist's projection of continued sales outperformance.
InvestingPro Tips highlight that Chipotle has been highly profitable over the last twelve months and analysts predict continued profitability this year. This aligns with Truist's expectations of improved profit margins due to moderate commodity inflation. However, investors should note that Chipotle is trading at a high P/E ratio of 57.6, which may indicate the stock is priced for high growth expectations.
For those seeking a deeper analysis, InvestingPro offers 11 additional tips for Chipotle, providing a more comprehensive view of the company's financial health and market position.
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