UPDATE: Raymond James Upgrades Chipotle Mexican Grill (CMG) to Strong Buy, Sees Higher Menu Pricing Likely Sticking
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Raymond James analyst Brian Vaccaro upgraded Chipotle Mexican Grill (NYSE: CMG) from Outperform to Strong Buy with a price target of $1,800.00.
The analyst comments "We are upgrading shares of CMG to Strong Buy from Outperform as we believe recently announced menu price increases create 1) significant upside to 2H consensus comp expectations and 2) increased confidence in our above-Street '22 EPS estimates (RJE $35.47 vs. consensus $32.50). We believe Chipotle has a very strong value proposition (chicken burrito still sub-$8 in many markets) and that price increases to cover higher wages will result in limited customer resistance. While recent wage increases will require an adjustment to management's margin recovery algo, we remain confident in its ability to recapture best-in-class store margins (25%+) in 2022 (assuming AUVs ~$2.8M). CMG shares have pulled back ~11% since mid-April, which we believe creates an entry point (2022 P/E 38x, low end of three-year range 35-50x) with significant upside potential vs. our DCF fair value (~$1,800)."
Shares of Chipotle Mexican Grill closed at $1366.80 yesterday.
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