Chipotle Mexican Grill (CMG) Tops Q1 Profit Views, Analysts Maintain Bullishness For 2021

April 22, 2021 7:11 AM EDT
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Price: $1,411.41 -1.06%

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    27 Buy, 17 Hold, 1 Sell

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Shares of Chipotle Mexican Grill (NYSE: CMG) are up about 1% in pre-market Thursday after the company topped profit estimates for the first quarter.

Chipotle reported earnings per share (EPS) of $5.36 per share to easily beat the $4.89 expected from the surveyed market analysts. Revenue came in line with the consensus ($1.74 billion), representing a YoY increase of 24%.

“Chipotle is off to a great start in 2021 thanks to our employees and their incredible level of collaboration and tireless dedication," said Brian Niccol, Chairman and CEO, Chipotle.

"As vaccines roll out and we get closer to moving past this pandemic, I believe Chipotle is well positioned for growth. I'm excited about our future as we remain focused on innovating in culinary, leading in food with integrity, and providing convenient access inside our restaurants and through our expanding digital ecosystem."

CMG saw its same-store sales rise by 17.2% compared to a year ago and 21% from 2019 levels. In March, the company saw the highest number of new customers ever. Online sales have continued to surge, up 50.1% on a year-to-year basis. The successful March launch of quesadillas is likely to have further boosted digital sales growth.

CMG raised delivery prices by 4% earlier in April after raising menu prices for delivery orders by an average of 13% in Q4.

“We haven’t seen a large amount of resistance from that, so I think that customers understand that a premium convenience experience has a premium cost associated with it,” said Chief Technology Officer Curt Garner to CNBC.

Looking forward, the company didn’t provide revenue guidance but it said it expects to open about 200 new locations this year.

“Given on-going uncertainty surrounding the future impact of COVID-19 on the broader US economy and any specific impact to our company, we are not providing fiscal 2021 comparable restaurant sales growth guidance,” it said.

Credit Suisse analyst Lauren Silberman reiterated the “Outperform” rating and raised the price target to $1,875.00 per share from $1,760.00 per share after another strong quarter.

“CMG continues to be one of our favorite near-term and long-term stocks as a rare company-owned compounding growth story positioned for double-digit top-line, margin expansion and unit growth acceleration, with increasing conviction in the margin story supportive of upside to numbers,” the analyst wrote in a note.

Similarly, Cowen analyst Andrew Charles maintained its “Top Pick” thesis for CMG. He also has an “Outperform” rating on the stock while he lowered the price target to $1,850.00 from $1,900.00 to reflect lower estimates.

“We argue Chipotle's "omnichannel" presence that features a 25% digital carry-out mix of sales & 24% third-party delivery mix leaves sales well positioned to outperform whether the reopening narrative is faster or slower,” he said in a memo sent to clients.

Charles outlines 3 reasons why he believesChipotle's 2021 comparable sales are well-positioned to exceed consensus estimates:

1) A growing mix of digital sales for pick-up & third-party delivery that could end 2021 at 49% of sales vs 46% in 2020 & 20% pre-COVID-19;

2) Proprietary survey data that suggests accelerating consumer demand for transparent food sourcing/“what’s in my food?”; and

3) Cowen expects the brand to be more top of mind for consumers, due to menu innovation & an ad budget that grows in line with sales (12% normalized growth).

“Further, the Chipotle Rewards loyalty program is showing early signs of promise and strong growth in enrollment to 21M active members in 2 years,” the analyst concludes.

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