Morgan Stanley (NYSE:MS) recently made a study of the restaurant industry going into 2023. The news was better for some than others, as Chipotle Mexican Grill (NYSE:CMG) slipped a step while Portillo’s (NASDAQ:PTLO) and Domino’s Pizza (NYSE:DPZ) gained a bit.
Despite the difference in Morgan Stanley’s ratings, Wall Street as a whole is in close agreement. Analyst consensus calls all three a Moderate Buy with price targets of $1,771.21, $412.50, and $27.40 on CMG, DPZ, and PTLO stocks, respectively.
Morgan Stanley, via analyst Brian Harbour, modified the ratings slightly for both companies when he took over for analyst John Glass. Harbour noted that restaurants are likely to see a decline in overall visits. However, the restaurants with the best overall value will see a lot less slowdown. Quick-service restaurants are likely to see a 1% drop, Harbour elaborated, but casual dining is likely to drop 4% in the same time frame.
Thus, Harbour notes Domino’s and Portillo’s stronger value propositions will give them some insulation from the general turndown. Chipotle, near the bottom of the value-proposition listings, was likely to take the full hit. Interestingly, Chipotle doesn’t have as far to fall as Domino’s does. In 2022, Domino’s saw $8.6 billion in systemwide sales.
Chipotle, however, could only muster up $7.5 billion. That was enough for each to land the ninth and tenth slots, respectively, for fast food sales. Yet Chipotle’s range of options may help it fight back; it recently announced that the Philly Cheesesteak Quesadilla would go to menus nationwide this year.