Chipotle Mexican Grill (NYSE:CMG) has historically been an outlier compared to restaurant stock, a factor that was behind a recent increase in an analyst’s price target. According to him, the operator of the fast-casual chain, which is heading towards the first stock split in its history and currently trading at over $3,000, deserves a price approaching $4,000. Here is a brief overview of this recent assessment.
A stock splitting superstar
That increase was more than 12% as Evercore ISI’s David Palmer increased his Chipotle target from $3,200 per share to $3,600. At the risk of stating the obvious, this is a pre-stock split price; this piece of financial engineering is subject to shareholder approval during a vote that will take place within the company June Annual Meeting.
Like many recent changes in analyst ratings, Palmer’s change came just after Chipotle revealed its quarterly results.
As usual, the company posted excellent numbers, with first-quarter revenue up 14% year-over-year to $2.7 billion, comparable restaurant sales up 7 % and profitability per share up an impressive 27% to $13.37. . Chipotle beat analysts’ consensus estimates on both the high and low end.
After analyzing this earnings report, Palmer increased his estimates for “offsets” and earnings. Referring to the former, he said its increase was because “Chipotle’s ‘premium food quality for the price’ and improved throughput help differentiate itself from an industry with declining traffic.”
Delicious technological temptations
The analyst also believes Chipotle can leverage technology to strengthen its bottom line, such as using artificial intelligence (AI) to improve its marketing efforts. Advanced kitchen equipment, meanwhile, should help it cut costs.
Chipotle’s management, in my opinion, is one of the best teams in the industry. The company is the benchmark in the fast-casual segment, with consistently high profit margins, almost unheard of in the demanding restaurant sector. It has proven capable of leveraging available technology to bolster its bottom line, and with more opportunities to do so, those numbers will certainly continue to improve. This title continues to be a winner.
Should you invest $1,000 in Chipotle Mexican Grill right now?
Before buying Chipotle Mexican Grill stock, consider this:
THE Motley Fool Stock Advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now…and Chipotle Mexican Grill wasn’t one of them. The 10 selected stocks could produce monster returns in the years to come.
Consider when Nvidia made this list on April 15, 2005…if you had invested $1,000 at the time of our recommendation, you would have $508,797!*
Equity Advisor provides investors with an easy-to-follow plan for success, including portfolio building advice, regular analyst updates, and two new stock picks each month. THE Equity Advisor the service has more than quadrupled the return of the S&P 500 since 2002*.
*Action…
