Chipotle Mexican Grill (NYSE: CMG) concluded a robust year of growth, and analysts at Citigroup anticipate the company will sustain its momentum with the release of first-quarter results on April 24.
Citi reaffirmed a buy rating on the stock while increasing the price target from $3,016 to $3,358, indicating a potential 15% upside over the next approximately 12 months from the current share price of $2,918.
Beyond the numerical target, the rationale behind the assessment is pivotal for long-term investors. The analyst is optimistic that the company’s efforts to enhance traffic flow within its restaurants will persist, thus fueling continued robust growth in same-store sales.
Why buy Chipotle stock
After an impressive fourth-quarter earnings report earlier this year, Chipotle is aiming for further achievements. The company saw substantial growth in both revenue and earnings, maintaining double-digit rates.
During the earnings call in early February, executives unveiled their strategy to enhance throughput at restaurants by increasing frontline staffing. Chipotle has long emphasized speed, efficiency, and quality food, which have contributed to its remarkable revenue and earnings growth, making it a standout performer for years. However, management sees even greater potential with this approach.
In the fourth quarter, Chipotle reported a 27% year-over-year earnings growth. Analysts at Citi anticipate the company to sustain annualized earnings growth of over 20%.
Although the stock’s valuation appears lofty, the company’s strong execution and high double-digit earnings growth are expected to justify its forward price-to-earnings ratio of 54.
While predicting a stock’s behavior post-earnings is challenging, Chipotle remains poised for significant growth opportunities. Citi anticipates the company to uphold its current pace of restaurant openings, expanding the base by a high-single-digit percentage each year. Management aims to double its current footprint to 7,000 locations.
