Chipotle Mexican Grill : Trefis Price Estimate Upgraded to $433 On Lower Discount Rate
As Chipotle Mexican Grill (NYSE: CMG) works to attract customers back to its stores after the E. coli food virus hit the restaurant badly in 2015, the company is witnessing an improvement in sales and traffic. This increase in revenues led to lower costs for Q1 2017 due to operating leverage. We believe as the company works on its digital segment and improves operations it is likely to see higher operating profits in the long term. The company appears to be on a turnaround path. This has reduced the volatility of its stock compared to the market, leading to a slight reduction in its beta. We have used the revised beta to lower our discount rate for the company by 15 basis points. The lower discount rate has led to a nearly $600 million increase in the valuation of the company per our estimates.
Further, lower outstanding shares (due to share buybacks) and a slightly lower net debt balance has improved the valuation further. These changes have led to a nearly 8% increase in our price estimate for Chipotle. The below table summarizes our changes:
- How Did Chipotle Stock Gain 20% This Year Despite Inflationary Headwinds?
- Up 17% This Year, Will Higher Pricing Boost Chipotle’s Stock Post Q2 Earnings?
- Where Is Chipotle Stock Headed Post Stock Split?
- Chipotle Stock Is Up 39% This Year. What’s Happening With The Company?
- Rising 25% Year To Date, Will Q1 Results Drive Chipotle Stock Higher?
- Up 11% Already This Year, Does Chipotle Stock Have More Room To Run After Q4 Results?
For further details on the company See Our Complete Analysis For Chipotle Mexican Grill
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