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Chipotle Stock: How Fast Casual Giant Wins
Stock Analysis & Ideas

Chipotle Stock: How Fast Casual Giant Wins

Chipotle (CMG) is a big winner among the restaurant franchise stocks.

Over the last 12 months, the company’s shares have gained 36.6%. They have also performed exceptionally well over the last 10 years, yielding an average annual total return of 19.4%, compared to 15.9% of the S&P 500. I’m bullish on Chipotle shares.

TipRanks assigns a Smart Score of Perfect 10 to the company shares, citing several developments, including solid fundamentals, technicals, and increased hedge fund activity. (See Analysts’ Top Stocks on TipRanks)

Solid Top and Bottom Lines

Winning on Wall Street is all about growing the top and bottom lines, and generating free cash flow. Chipotle has been doing all three. Since it went public, Chipotle’s revenues and earnings have been growing by double digits (except in 2016 and 2020). Meanwhile, the company has been free cash flow positive over the said period, except for 2012, 2016, and 2020.

Chipotle’s solid performance continued in Q3 2021, with total revenue rising 21.9% to $2 billion and $7.18 earnings per share. The company opened 41 new restaurants, including two recent locations.

Sound Strategy and Exceptional Execution

A solid financial performance cannot happen by accident. It requires a sound strategy and an exceptional execution. Chipotle has both, as evidenced by its Q3 financial report.

“Chipotle’s third-quarter results demonstrate strong momentum in our business fueled by a multi-pronged strategy and a passionate team that’s delighted to welcome more guests back into our restaurants,” said Brian Niccol, chairman, and CEO, Chipotle, following the release of the Q3 report. “Our team has proven their ability to be resilient and successfully execute against macro complexities.

“As a result, I believe we are better positioned to drive sustainable long-term growth than ever before, which makes me excited about what we can accomplish in the years ahead.”

Wall Street’s Take

Over the last three months, the 23 analysts following Chipotle have been very bullish on the company shares, rating them a Strong Buy.

The average Chipotle price target is $1,984.32, with a high forecast of $2,600 and a low forecast of $150. The average price target represents 11.6% upside potential.

Bottom Line

Chipotle is among a few companies that have demonstrated a steady growth of both the top and bottom lines, thanks to a sound strategy and exceptional execution.

Disclosure: At the time of publication, Panos Mourdoukoutas owned shares of Chipotle.

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