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Chipotle: Analysts’ Recommendations after Its 2Q17 Earnings

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Target price

Chipotle’s (CMG) lower-than-expected SSSG (same-store sales growth) and revenue in 2Q17 suggested that the recovery from food safety issues in October 2015 has been slower than expected. The recent food safety issue in Sterling, Virginia, could have compelled analysts to lower their 12-month target price for Chipotle.

As of July 27, 2017, analysts expect Chipotle’s stock price to reach $400.68 in the next 12 months, which represents a potential return of 26.0% from its current levels. Before its 2Q17 earnings, analysts expected a 12-month target price of $434.04.

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After the announcement of its 2Q17 earnings, many analysts lowered their target price. On July 26, 2017, UBS lowered its target price from $445 to $380, Wedbush Securities lowered its target price from $390 to $350, Morgan Stanley lowered its target price from $445 to $380, and RBC cuts its 12-month target price to $400 from $500. Only Jefferies maintained its target price of $350. It upgraded the stock to “hold” from “underperform.”

The target price and return potential of Chipotle’s peers are as follows:

  • Shake Shack (SHAK) – $39.56 with a potential return of 13.9%
  • The Cheesecake Factory (CAKE) – $57.20 with a potential return of 17.3%

Analysts’ ratings

Of the 34 analysts that follow Chipotle, 23.5% are recommending a “buy,” 64.7% are recommending a “hold,” and 11.8% are recommending a “sell.”

Although Chipotle’s target price is higher than its current stock price, it doesn’t mean an automatic “buy.” Investors should carefully analyze the various estimates that we discussed in this series before making any investment decisions.

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