Analysts Favor ‘Hold’ Ratings ahead of CMG’s Q4 Earnings

Analysts’ recommendations

Of the 33 analysts that follow Chipotle Mexican Grill (CMG), 36.4% have given the stock “buys,” 48.5% have given it “holds,” and 15.2% have given it “sells.”

On average, analysts have given the stock a price target of $492.96, which represents a potential fall of 7.3% from its January 28 closing price of $532.

Analysts Favor ‘Hold’ Ratings ahead of CMG’s Q4 Earnings

In January, BTIG, JPMorgan Chase, Cowen and Company, Telsey Advisory Group, RBC, and KeyBanc have all raised their price targets on Chipotle stock. BTIG raised its price target from $515 to $605, Cowen and Company increased its price target from $430 to $485, and RBC raised its price target from $510 to $550.

Earlier this month, Yahoo Finance reported that Peter Saleh and Ben Parente of BTIG had selected Chipotle as one of their top picks for 2019. In a research note, they wrote, “We believe Chipotle has multiple levers at its disposal in 2019 to drive both top and bottom line outperformance, including menu innovation, digital sales growth, loyalty, menu pricing and improving new unit economics.”

Peer comparison

Of the 12 analysts covering Shake Shack (SHAK), 33.3% have recommended “buys,” 50% have recommended “holds,” and 16.7% have recommended “sells” on its stock. Analysts’ average price target of $52.55 implies a potential upside of 5.8% from its January 28 closing price of $49.66.

Of the 32 analysts covering McDonald’s (MCD), 78.1% have recommended “buys,” and 21.9% have recommended “holds” on its stock. Their average price target of $195.77 implies a 6.6% upside from its current price of $183.60.

Valuation multiple

On January 28, Chipotle was trading at a forward PE multiple of 44.4x compared to 37.3x before the announcement of its third-quarter earnings results. The surge in Chipotle’s stock price also raised its valuation multiple. On the same day, Chipotle’s peers Shake Shack and McDonald’s were trading at forward PE multiples of 68.6x and 22.3x, respectively.

On January 28, Chipotle was trading at 62.4x analysts’ 2018 EPS expectation of $8.53 and 44.5x analysts’ 2019 EPS expectation of $11.96. Its EPS are expected to rise 29.2% and 40.3%, respectively, in 2018 and 2019.