We’re upgrading Chipotle Mexican Grill

Thanks to strong second quarter earnings, we have revised Chipotle Mexican Grill’s financial model and raised our target price for Chipotle Mexican Grill from $ 2,080 to $ 2,250. We expect the company’s restaurant business profitability to rise to 27.6% by 2024. Our forecast is in the middle of the market consensus range of 27-28%. We raise our estimate for 2022 store sales growth to 6.5% from 5%, which is over 6% for Consensus Metrix. In the long term, we maintain the prospects for sales growth in stores in the region of 5% per annum. Chipotle Mexican Grill has one of the finest financial profiles in the restaurant industry.

We believe Chipotle’s omnichannel nature allows the company’s sales to be well positioned to grow its business, whether it reopens faster or slower after a lockdown. We believe Chipotle can once again show outperforming sales and market share growth in 2021 thanks to increased digital sales as well as a new menu. We expect the Chipotle brand to gain more consumer attention through menu innovation and an advertising budget that grows with sales. In addition, the Chipotle Rewards loyalty program is showing encouraging first results and a significant increase in active members to 24 million in about 2 years.

Chipotle Mexican Grill operates over 2,700 fast-casual Mexican restaurants, serving tacos, burritos, burrito bowls (no tortilla) and salads through an efficient, assembly-line service structure. The system is 100% company operated and targets an ultimate domestic presence of 6,000+ locations, aided by new prototypes such as Chipotlanes with a digitally enabled drive-thru and digital-only smaller prototypes geared for off-premises, to better cater to where the industry is heading.