Analyst Nicole Miller Regan doubled down on her Overweight rating on Chipotle [$CMG] and upped her price target to $2,000 from $1,835, a new high among analysts. She dubbed the shares her “top investment recommendation” ahead of the company’s earnings report on Tuesday.
Be that as it may, she doesn’t expect a home-run report. She thinks comparable sales rose by 6% in the Q4 and that they’ll jump 10% in the current fiscal Q1, in line with expectations. An upturn in virus cases in late 2020 was a headwind for many retailers and restaurants, and Regan cautioned that “while Chipotle is resilient, it is not immune.”
She’s optimistic about the longer-term potential for the stock. “Chipotle is our highest conviction recommendation for the New Year based on confidence that the company has the human capital, operational capabilities, and technological tools to carry out its long-term growth strategy,” she wrote.
While the stock has done well, Regan believes Chipotle is still in a recovery phase, so it isn’t far-fetched to think that still more upside can exist. The chain continues to open stores and drive sales at those already operating.
Valuation has been one of the biggest demerits against the stock throughout its upswing. Regan noted that her target reflects a price-to-earnings multiple of 68 times, which is higher than the mean of 52 times since its 2006 IPO. Yet it’s in line with its average since 2018. She thinks shares deserve a premium, given the chain’s growth despite difficult conditions in the industry, especially given a “lack of equivalent investment options.”