On Thursday, Baird adjusted its outlook on Chipotle Mexican Grill (NYSE:CMG) shares, increasing the price target to $74 from $70. The firm upheld its Outperform rating on the stock, in light of the 50-for-1 stock split that took effect on the same day.
The revision in the price target takes into account the recent stock split, the progression of time, and a marginally lower risk-free interest rate. Baird's analysis suggests that Chipotle presents a compelling risk/reward scenario at the present share price, with expectations of consistent operational momentum in the short term and potential for sustained growth over the coming years.
The new price target of $74 is derived from a discounted cash flow (DCF) model. This model presumes that Chipotle has the capacity to reach over 9,000 company-operated stores in the long run. It also incorporates a terminal growth rate of 4.0% and a discount rate of approximately 8.3%.
The analyst's comments highlight the mechanical adjustments made to their estimates to reflect the stock split. The adjustments also consider the updated price target, which now mirrors the stock split, the elapse of time since the last target was set, and the updated risk-free rate.
In other recent news, Chipotle Mexican Grill has been the subject of several significant developments. The company's shareholders approved a significant 50-for-1 stock split, making its shares more accessible to a wider investor base. BTIG maintains a Buy rating on Chipotle and adjusted the target to $67 post-split. The firm also revised its 2024 and 2025 earnings per share (EPS) estimates for Chipotle to $1.15 and $1.37, respectively.
In the first quarter of fiscal 2024, Chipotle reported a 7% increase in comparable sales growth and total sales of $2.7 billion, with digital sales accounting for 37% of the total. The company also plans to open between 285 to 315 new restaurants throughout the year.
Analysts have shown confidence in Chipotle's performance. Argus raised its price target to $3,888 from $3,668, maintaining a Buy rating and highlighting the company's strong financial position. Goldman Sachs initiated coverage of Chipotle with a Buy rating and set a price target of $3,730.00, emphasizing the company's ability to grow its average unit volume and scale its business efficiently.
In other company news, Chipotle announced a special one-time equity grant for its longstanding employees. Additionally, the New York Stock Exchange is currently investigating a technical issue that caused temporary trading halts of several NYSE-listed stocks, including Chipotle.
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