What’s next for Chipotle stock after 6 months of stagnation?

By: Ruchi Gupta
Ruchi Gupta
Ruchi takes fitness and maintaining a healthy lifestyle very seriously. During her spare time, she enjoys swimming, running, and… read more.
on Jun 15, 2021
  • Whether the company is still attractive, after a disappointing year
  • The stock is down over 11%
  • Chipotle showed a 7% sales growth in 2020 and analysts are modeling a 23% sales growth in 2021

Chipotle Mexican Grill, Inc. (NYSE: CMG) is having a disappointing year. After it had double-digit rallies the past three years, it’s barely recorded positive results over the past six months. From the April 2020 peak it had, it’s now down over 11%. So, what will it take for the company to get the ‘spice’ back into their stock? This was the topic of a recent CNBC “Trading Nation” discussion.

Is CMG stock still attractive?

Nancy Tengler of Laffer Tengler Investment says there’s some good value to be found in the CMG stock price. Specifically, the company is still attractive because they’ve still been recording strong sales over the past few years and the momentum can continue. According to FactSet, Chipotle showed a 7% sales growth in 2020 and analysts are modeling a 23% sales growth in 2021.

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If you look at it on a relative price-to-sales ratio, which is how we look, it’s still attractive,” Tengler said.

The company recently said it will raise its menu prices yet again. In fact, this is something the company has done three times over the last nine months and each time the price went up, consumers never traded down for cheaper alternatives.

The outlook for CMG also looks favorable as the company continues to invest in its digital business, she said. In fact, this plays into a broader theme of investing in companies “where consumer meets digital.”

What’s going on with the price action of the stock?

Ari Wald of Oppenheimer & Co said that the company has a lot of “rotation potential” because of CMG stock’s 1% gain this year.

The Chipotle stock chart shows a near breakout above $1,375, which completed about a double bump that lasted a month, which can be seen in the W-shape on the stock price chart. He also said that a breakout in the Russell 1000 growth index is highly possible and should be supported.

Chipotle does fall into the higher growth category of stocks and it is prime for a trading rally to the upper end of its range at the $1,500 level and shares could push back towards the $1,550 highs. He said:

In this bull market, investors are going to look for this stock at least for a trading rally from here and, as it stands based on technicals, a trading rally makes sense.

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