On Friday, Wedbush Securities adjusted its share price target for Chipotle Mexican Grill (NYSE:CMG) shares, raising it from $2,400 to $2,850, while keeping a Neutral rating on the stock.
The firm projects that Chipotle will continue to capture accelerated market share gains in the post-COVID environment, which should translate into sustained growth surpassing pre-pandemic levels.
The new price target reflects a shift in the firm's valuation horizon to 2025 from 2024, implying a 41.6x multiple, net of cash, on the 2025 earnings per share (EPS) estimate. This represents about a 10% premium over Chipotle's pre-pandemic 10-year median forward price-to-earnings (P/E) ratio of 37.8x.
The rationale behind the premium valuation is Chipotle's current annual EPS growth algorithm, which is over 20%, compared to its pre-COVID 10-year EPS compound annual growth rate (CAGR) of 13.5%. Despite this positive outlook, the firm also notes potential challenges, as it sees slightly lower visibility into the company's medium-term trajectory amid increasing macroeconomic risks.
Wedbush's updated 12-month price target of $2,850 for Chipotle Mexican Grill indicates the firm's expectation for the stock's performance looking forward, based on the anticipated earnings and market conditions. The Neutral rating suggests that the analyst believes the stock is fairly valued at its current price, considering the balance of potential growth and the risks identified.
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