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Chipotle and Shake Shack: Can Their Momentum Continue?

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Chipotle’s stock performance

After delivering returns of 49.4% last year, Chipotle Mexican Grill (CMG) has continued its upward momentum in 2019 as well. As of March 18, the company was trading at $655.80, which represents a rise of 51.9% YTD. The company has outperformed the S&P 500 Index, which has returned 13.0%, and the Consumer Discretionary Select Sector SPDR ETF (XLY), which has risen 12.8% YTD.

The strong performance in the fourth quarter and investors’ optimism surrounding the management’s implementation of digital advancements drove Chipotle’s stock price. Chipotle posted its fourth-quarter earnings on February 6. The company outperformed analysts’ EPS and revenue expectations. The company also outperformed analysts’ SSSG (same-store sales growth) expectation of 4.5% with posted SSSG of 6.1%. On March 12, the company launched Chipotle Rewards, its loyalty program on a national level, which also contributed to a rise in the company’s stock price. On March 18, Piper Jaffray raised its price target from $661 to $725, which drove the company’s stock price to hit a 52-week high of $656.59 before closing the day at $655.80.

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Shake Shack’s stock performance

Last year, Shake Shack (SHAK) had returned just 5.1%. However, since the beginning of this year, the company’s stock price has increased by 20.8% as of March 18. The company’s stock price was driven by optimism surrounding its implementation of digital advancements to enhance customers’ experience and the strengthening of the broader equity market.

Shake Shack posted its fourth-quarter results on February 25. The company’s adjusted EPS for the fourth quarter came in at $0.06 on revenues of $124.3 million, outperforming analysts’ EPS expectation of $0.03 and revenue estimate of $118.8 million. The company’s SSSG of 2.3% also beat analysts’ expectation of a decline in SSSG of 1.2%.

Series overview

In this series, we’ll look at Chipotle and Shake Shack’s valuation multiple and analysts’ recommendations. We will also cover analysts’ expectations and management’s guidance for 2019. First, let’s look at analysts’ recommendations.

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