- Chipotle Mexican Grill reached a peak at the close of 2023, but there’s optimism for new highs ahead.
- The first five analysts’ revisions of the year have this stock poised for an all-time high.
- The Q4 results are anticipated to act as a potential catalyst for driving up share prices as the bar has been set low.
Chipotle Mexican Grill (NYSE:) shares entered a correction phase alongside the broader market at the beginning of 2024. Despite this, the company’s continued execution at the highest level, fueled by CEO Brian Niccol’s forward-thinking approach and emphasis on digital channels, remains a strong undercurrent. Although downward pressure on stock prices is plausible, the recent positive activity from analysts suggests a rising trajectory for this premier restaurant stock.
Marketbeat is tracking five revisions to the analysts’ research in the first week of the year. All five display a bullish sentiment, with an average price target increase of $391. This accounts for a 17% rise from the current price action and sets the 2024 targets’ consensus at $2535 – 12% above the general estimate and nearly 15% higher than the current price action. The upper end of the range implies the potential for an additional 10% upside. The consensus among 25 analysts is a ‘Moderate Buy.’
Particularly noteworthy is Stephens’ establishment of a new high-price target on January 2nd. Rating the stock as Overweight, they augmented their target by 20%. This adjustment reflects a 7.5% increase in the Q4 comp forecast, corroborated by channel checks. Analyst Joshua Long’s channel checks indicated strong comp traffic through November 2023, with an uptick in December. The promotion of carne asada, digital traffic, and store-level optimization/efficiency were cited as pivotal factors driving this strength.
Setting a Low Bar for Q4 Results
Analysts are anticipating double-digit top-line growth and margin expansion in Q4 but have set the bar modestly, with over half of them reducing their forecast in the last two months. This is despite the contrary trends and recent insights from Stephens. The Marketbeat.com consensus forecasts a 13% increase in revenue growth and a 16% growth in GAAP and adjusted earnings. Key focal points will include the results and guidance for the upcoming year.
The company’s aim to open around 300 new stores in 2024, alongside remodels and repositioning, indicating a surge in Chipotlanes. This strategic approach is expected to bolster company performance as it builds on its momentum from opening approximately 250 stores in 2023, resulting in an 8% store count growth. This growth rate is estimated to increase to approximately 10% in 2024, hence reinforcing expectations for sustained strength. Analysts are targeting a 13% increase in top-line growth in 2024, a relatively conservative figure given the consistent mid-to-high single-digit comp store and store count growth observed in 2023 and predicted for 2024.
Insider Purchase and Institutional Holdings
In December, insider Gregg Engles made a notable purchase of CMG stock. Despite not having a substantial holding, his acquisition of 1,616 shares, amounting to $2 million, is significant. Notably, this transaction doubles his position. Mr. Engles, a company director, is signaling confidence in the company. Although other insiders, including CEO Brian Niccol, have sold shares, their sales have been regular, small scale, and likely tied to share-based compensation.
Institutional holdings present a more impressive picture, with institutions owning about 92% of the stock. This includes a nearly 10% position held by the Vanguard Group. Institutional activity has been varied over the past 12 months but has leaned towards a bullish stance on the whole, implying rotation within a rally rather than its culmination.
The Technical Outlook
Chipotle Mexican Grill encountered a peak at the conclusion of 2023 and is currently in a corrective phase. The pivotal question revolves around the potential depth of the correction before an upturn, with a shallow correction appearing likely. The primary support target lies near $2,175, marginally below the current price by less than 2%. Should the market initiate a rebound from this juncture, the stage could be set for a new high in the early part of the year. Alternatively, failure to rebound could see CMG stock retreat to the $1,950 level, with a prospective rebound delayed until mid-year or beyond. In such a scenario, there is a possibility of CMG becoming range-bound, with the $2,300 level representing a resistance.
