Services

How the Turnaround at Chipotle Has Made It a Top Stock

Chris Lange

Published: September 23, 2019 1:40 pm

Last Updated: January 30, 2020 3:33 pm

Chipotle Mexican Grill Inc. (NYSE: CMG) shares are trading near all-time highs, and it has been a long road to reach this milestone. The momentum for this stock really took off when Brian Niccol took over as chief executive officer in March 2018.

When Niccol took the reins, Chipotle was a $325 stock and near multiyear lows. Now it is the best performing stock in the S&P 500 so far in 2019.

The burrito chain’s fall from grace started in 2015 when news broke that customers had fallen sick from E. coli. A few other outbreaks afterward and a data breach shed doubt on the future of the company. Ultimately, a change at the top was necessary, and it seems to have paid off.

Niccol commented on Chipotle’s comeback to MarketWatch:

When I got to Chipotle, the company had tons of ideas — an almost crippling [number]. I think we’re focused on the right strategies, execution is getting better, the response has exceeded expectations — I think that’s why we’ve seen the response from the financial markets.

The turnaround at Chipotle extends to most of the business. The company introduced a limited-time carne asada menu item this week, and in the past it introduced queso.

The Chipotle App and partnering with Doordash also have opened the burrito chain to what was a largely untapped market of delivery.

Niccol added:

We thought initially the app would be something more for heavy users. But it’s also been a plus for new customers, who may grow anxious from the pressure of making ordering decisions and then selecting from among the add-on options with a line of customers waiting behind them.

Excluding Monday’s move, Chipotle had outperformed the S&P 500, with its stock up 93% year to date. In the past 52 weeks, the stock was up 70%.

Here’s what some analysts had to say about Chipotle:

• SunTrust Banks has a Buy rating with a $900 price target.
• Wedbush has an Outperform rating and a $980 price target.
• The Goldman Sachs Buy rating comes with a $1,000 price target.
• Piper Jaffray has an Overweight rating and a $904 price target.

Shares of Chipotle traded up about 1% on Monday to $845.85, in a 52-week range of $383.20 to $857.90. The consensus price target is $781.69.