More Room For Gains in Chipotle’s Stock?

[Updated 11/23/2021] Chipotle Update

Chipotle Mexican Grill‘s stock (NYSE: CMG), has gained 30% since the end of 2020. The gain comes despite Chipotle announcing price hikes in the middle of the year to cover the cost of raising the wages of their workers and higher ingredient costs. In the recently announced Q3 2021 the company saw comparable restaurant sales increase by 15.1% y-o-y while total revenue increased 21.9% y-o-y to $2.0 billion. Digital sales continued to grow 8.6% and accounted for 42.8% of sales. Operating margin also improved to 12.3% for the quarter.

Overall, we expect Chipotle’s revenues to rise by 24% to $7.4 billion for 2021 with net income increasing to $681 million. This will increase the EPS to $24.64 for 2021. For FY 2022 revenue is expected to be $9.2 billion. Further, its net income is likely to rise to $854 million, increasing its EPS figure to $31.46 in 2021, which coupled with the P/E multiple of 63x will lead to Chipotle’s valuation around $1981, which is 15% higher than the current market price.

[Updated 06/18/2021] Will Price Hike Halt Chipotle’s Stock Rally? 

Chipotle Mexican Grill (NYSE:CMG), is an American chain of fast casual restaurants in the United States, United Kingdom, Canada, Germany, and France, specializing in Mexican cuisine. CMG has gained 65% – moving from about $837 to $1383 since the end of 2019. Chipotle recently hiked its prices to cover the cost of raising the wages of their workers. The company had said in May that it would raise hourly wages of its restaurant workers to an average of $15 an hour by the end of June. The hike was also a consequence of rising ingredient costs in the recent months. We believe the rise in menu prices or the wage hikes will not reduce its  value. 

We expect Chipotle’s revenues to rise by 24% to $7.4 billion for 2021. Further, its net income is likely to rise to $566 million, increasing its EPS figure to $20.46 in 2021, which coupled with the P/E multiple of 83.6x will lead to Chipotle’s valuation around $1710, which is 29% higher than the current market price.

[Updated 02/16/2021] Chipotle Update

After rallying 82% since the end of 2019, Chipotle Mexican Grill (NYSE:CMG) has moderate upside in the near term. CMG’s stock grew from $837 at the end of 2019 to near $1528 now, compared to the S&P 500 which gained 22% since the end of 2019. The company has seen revenue and earnings rising over recent years. 

During the Covid-19 crisis, CMG saw its revenue rise by 7% in 2020 as lockdowns forced the company to shut down dine-ins but was offset by a huge increase in digital sales. In FY 2020, CMG beat consensus estimates for revenue at $6 billion, up 7% y-o-y, and earnings per share recorded at $12.74 compared to $12.62 in the same period of the previous year. Further, the company reported $664 million of cash inflows from operating activities for the first nine months.

We expect Chipotle’s revenues to rise by 21% to $7.2 billion for 2021. Further, its net income is likely to rise to $543 million, increasing its EPS figure to $19.64 in 2021, which coupled with the P/E multiple of around 83x will lead to Chipotle’s valuation around $1643, which is 7.5% higher than the current market price.

[Updated 03/24/2020] Chipotle’s Losses Have Tracked The S&P 500 So Far, But Can It Outperform Post Coronavirus Scare?

Chipotle Mexican Grill’s (NYSE:CMG) stock declined by about 8% between 8th March 2020 and 24th March 2020 (vs. an 18% decline in the S&P 500), and the stock is down 23% since 31st January after the WHO declared a global health emergency in light of the coronavirus spread (vs. about 27% decline in the S&P 500 since then).

Looking back at the 2008 financial crisis, we see CMG’s stock declined from levels of almost $123 in October 2007 (the pre-crisis peak) to below $55 in March 2009 (as the markets bottomed out) – implying CMG stock lost over 55% of its value from the approximate pre-crisis peak. This marked a slightly higher drop than the broader S&P, which fell by as much as 51%.