Cowen analysts: Chipotle shares could climb by more than 10%

on Aug 17, 2021
  • Cowen rates Chipotle at outperform with a price target of $2,080 a share.
  • Joe Terranova discusses Cowen's bullish call on CNBC's "Halftime Report".
  • Shares of the fast-food company have climbed by 40% since May 2021.

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Chipotle Mexican Grill Inc (NYSE: CMG) has had a good run in recent months, with the stock up about 40% since May 2021 as people turned to eating out amidst easing COVID-19 restrictions. Analysts at Cowen, however, see potential for more upside in CMG.

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Cowen added Chipotle to its ‘Restaurant Conviction List’ on Tuesday. The American multinational rates the stock at “outperform” with a price target of $2,080 a share that represents a more than 10% upside from here.

Joe Terranova’s remarks on CNBC’s “Halftime Report”

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Cowen analysts attributed the bullish stance to the American fast-food company’s strong Q2 results and better than expected restaurant-level margins. On CNBC’s “Halftime Report”, Virtus Investment Partners’ Joe Terranova agreed to Cowen’s call and said:

“$1.2 billion in cash, no debt on the balance sheet, a focus on digital menu opportunities, and lunch revenue that hasn’t even begun to recover to the pre-pandemic levels yet, this is a company that you want to stay with for the long term.”

Terranova is not worried about the valuation concerns

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Terranova acknowledged the valuation-related concerns around Chipotle but expressed confidence that it will eliminate such risks as it continues to grow its revenue towards 20%. Earlier this year, in June, Chipotle increased menu prices by close to 4% as it raised the hourly pay for its workers.

In the fiscal second quarter, Chipotle noted a 38.7% annualised growth in revenue as digital sales climbed by 10.5%. According to CFO Jack Hartung, the California-based company will open about 200 new restaurants this year, with over 70% of these offering digital, order-ahead pickup lanes.

Shares of the company are flat on average on the intraday chart. The $52 billion company now has a price to earnings ratio of 90.81.

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