Chipotle's (CMG) ShopHouse Asian Concept Will Be Huge Hit, Target Raised - Goldman

Goldman Sachs reiterated their Buy rating and lifted their price target on Chipotle Mexican Grill (NYSE: CMG) from $365 to $380 after visiting the company's first ShopHouse Asian concept restaurant in DC.

The firm said Chipotle's fundamentals are robust and "we have become incrementally more optimistic regarding ShopHouse as a potentially meaningful upside option not currently priced in the stock."

Goldman said ShopHouse is entering a "sweet spot" in the restaurant sector. They note the fast casual segment is compounding at 12% per year, but still represents only 3% of restaurant industry sales. Being the #1 player in fast casual, Chipotle lends credibility and expertise.

The firm sees Chipotle funding 1,200 ShopHouse locations entirely with cash generated between now and 2014 year end.

Commenting on the initial demand at the first store in Washington DC, the analyst noted: "The line was 30 people deep during the peak lunch hour despite little marketing other than word of mouth. Consumers rated the food highly and saw good price value." Peak lunch hour time saw 50-200 people/hour, roughly in line with Chipotle's current standard. Average service time was 8-10 minutes despite the line.

For more ratings news on Chipotle Mexican Grill click here and for the rating history of Chipotle Mexican Grill click here.

Shares of Chipotle Mexican Grill closed at $333.19 yesterday.

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