Chipotle Mexican Grill (CMG) stock may have experienced some profit taking today, but the selling didn’t last. While the stock was left out of broader market gains today, the bulls returned in after-market trading, sending shares into the green. Besides, with a 7% jump in the past week since reporting blowout first-quarter results, and a whopping 37% increase year-to-date, Chipotle stock has given investors plenty to cheer. And there appears to be more where that came from.
In March, Chipotle’s board announced a 50:1 stock split, the first of its kind for the company and one of the largest in the history of the NYSE. The split, which is expected to take effect on June 26, was a long time coming. Chipotle’s stock has been trading in the stratosphere since the pandemic era when it crossed the $1,000 level. Today it’s trading within a stone’s throw of its record high of $3,241 reached in April. And based on Wall Street’s bullish forecasts, the stock-split gains don’t appear to be priced into the share price just yet.
Chipotle Economy
With a market cap of $86.2 billion, Chipotle stock is trading at a forward PE ratio of approximately 67 compared with 20.13 for the S&P 500. McDonald’s (NYSE: MCD) never suspected its spin-off restaurant concept would be such a smash hit. By performing a 50:1 split, Chipotle is sending a message that it’s confident about future demand. The company has an aggressive expansion plan in place in which it plans to open hundreds of new locations this year for which it will need to hire thousands of employees.
Chipotle has come a long way from selling 1,000 burritos per day to college students. The chain takes a different tack from most other restaurant chains in that its stores are company-owned rather than franchised. With Q1 revenue of $2.7 billion, this approach combined with its locally sourced ingredients have been a recipe for success. Chipotle has managed to overcome the stigma that was attached to the brand during the E. coli breakout, and customers have proven their willingness to return.
Is Chipotle a Buy in 2024?
There’s no denying Chipotle has already had an impressive run of late. Times are good despite high inflation and rising menu prices. Chipotle seems to have found a sweet spot with consumers who based the latest wave of earnings are favoring the fast-casual concept over other options like McDonalds and Starbucks (Nasdaq: SBUX).
Analysts were scrambling to raise their price targets on Chipotle stock following Q1 earnings results, agreeing there’s more runway for gains. Among them, TD Cowen lifted its price target by 3% to $3,500 per share with a “buy” rating, while Oppenheimer expects $3,300 thanks to traffic trends that are “impressive” in an otherwise “challenging industry environment.”
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