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Why Investors Are Optimistic about Chipotle’s Q1 Earnings

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Stock performance

Chipotle Mexican Grill (CMG) plans to post its first-quarter earnings after the market closes on April 24. As of April 15, the company was trading at $712.27, which represents a rise of 35.4% since the announcement of its fourth-quarter earnings on February 6.

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Drivers of Chipotle’s stock price

In the fourth quarter of 2018, Chipotle outperformed analysts’ EPS and revenue expectations. The company also beat analysts’ SSSG (same-store sales growth) expectations of 4.5% with posted SSSG of 6.1%. During the quarter, the company’s online sales grew 66% YoY. In March, the company launched its loyalty program, Chipotle Rewards, on a national level.

So, the strong fourth-quarter results and investor optimism surrounding the company’s implementation of digital advancements appear to have led to an increase in the company’s stock price. Also, the company’s stock price was positively impacted by analysts’ upgrades and price target increases.

Year-to-date performance

Chipotle’s stock price continued to rise this year after returning 49.4% last year. YTD, the company’s stock price has increased by 65.0%. During the same period, peers Shake Shack (SHAK) and McDonald’s (MCD) have returned 32.8% and 8.0%, respectively. The broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests in restaurant and travel companies, has returned 19.7% YTD.

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