tiprankstipranks
Chipotle Stock: A Top Candidate Ahead of Earnings, Says Oppenheimer
Stock Analysis & Ideas

Chipotle Stock: A Top Candidate Ahead of Earnings, Says Oppenheimer

The big tech brigade reports this week, and the results will naturally draw most of the Street’s attention. But there are other interesting financial statements being released too. Once the bell rings to halt today’s trading action, Chipotle Mexican Grill (CMG) will announce the quarter’s display.

And if you’re on the lookout for outperformance against the turbulent economic backdrop and lowered Street expectations, then Oppenheimer’s Brian Bittner thinks you should look no further than the fast casual giant.

“We believe CMG represents a rarity as we hunt through our coverage for earnings upside,” the 5-star analyst said. “Our analysis suggests an attractive setup for SSS while consensus still overly discounts the equation for margins and EPS power through 2023. This thesis is further enabled by accelerating unit growth and a CMG food commodity setup that appears to be improving, based on our updated work.”

As announced in late-July, the company’s outlook for 3Q22 SSS (same store sales) called for a mid-to-high single digits uptick, with an “implied” restaurant margin close to 25%.

But according to Bittner, since then his analysis indicates that in August/September, industry-wide trends “accelerated.” At the same time, there has been improvement on CMG’s commodity side (i.e., avocados).

As such, all of Bittner’s estimates are now above consensus; for SSS, Bittner has 8.0% vs. the Street’s +7.4%, restaurant margins at 25.3% compared to 25.2%, and EPS at $9.36 against consensus at $9.18.

Furthermore, highlighting buyside’s “nervousness around 4Q22 trends,” Bittner thinks these are misplaced, believing they represent an “actionable opportunity.” Lastly, not enough credit is given to CMG’s business model, which Bittner says is “more defensive than perceived.”

Down to business, how does this translate to investors? Bittner rates the stock as Outperform (i.e., Buy) while his $1,800 price target makes room for gains of 15% over the one-year timeframe. (To watch Bittner’s track record, click here)

Bittner might feel consensus estimates are too low, but he is far from alone in his bullish assessment. The stock claims a Strong Buy consensus rating, based on 17 Buys vs. 3 Sells. The average target is also a touch higher than Bittner will allow; at $1,832 and change, the figure represents potential upside of 17% from current levels. (See CMG stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

Trending

Name
Price
Price Change
S&P 500
Dow Jones
Nasdaq 100
Bitcoin

Popular Articles