Wall Street believes this one stock was the biggest earnings winner … and it’s not tech
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It’s still early in the earnings season, but Wall Street thinks burrito chain Chipotle is the biggest winner. The company surpassed consensus estimates on both adjusted earnings per share and revenue Tuesday , reporting $10.50 and $2.37 billion, respectively. Chipotle also told investors that traffic to its restaurants climbed throughout the quarter — even though menu items are up about 10%. Wall Street took the news as a resounding success. The stock rallied 14% Wednesday, and several analysts hiked their estimates on where shares could go moving forward. CMG YTD mountain Shares of Chipotle soared more than 14% on Wednesday after an upbeat earnings report a day earlier. “CMG remains a premium brand with strong digital/off-premise capabilities that have positioned the co better than most through the current environment,” Jefferies research analyst Andy Barish wrote on Tuesday. The firm raised its price target to $1,800 from $1,550, which was about 1% upside compared to Tuesday’s closing price. The stock is currently trading around $2,036. Meanwhile, BTIG analyst Peter Saleh says while Chipotle’s ability to increase foot traffic while also raising menu prices was impressive, he thinks there’s more room for margins to grow as well. “We believe investors should take note of the step change in restaurant margins, which we believe is still in the early innings,” Saleh said. He added that his firm “can’t find any flaws in the results” and raised its price target to $2,175 per share from $1,825. The new target implies 22.2% upside. Bank of America, meanwhile, pointed toward Chipotle’s growth of its loyalty program, which could help the company persevere if the broader macroeconomic headwinds worsen. “We view the continued loyalty program membership build (+20% in 1Q23) as a further driver of traffic and spend as well as an efficient platform to offer value should the macro environment deteriorate,” BofA analyst Sara Senatore said Wednesday. Senatore increased her price target on the stock to $2,200 per share from $1,850. That target implies upside of 23.5%. Wells Fargo also hiked its price target on the burrito chain to $2,050 from $1,900. “All in, we struggle to find holes to poke, our 2H model appears flexible, and thus our estimates/PT are grinding higher,” Wells Fargo analyst Zachary Fadem said. Elsewhere, Morgan Stanley raised its price target on Chipotle to $1,910 Wednesday, and said some near-term concerns the firm previously had on the company seem to have abated. “Longer term, CMG is among the best positioned to drive further labor efficiency with new equipment/automation, in our view,” Morgan Stanley analyst Brian Harbour wrote. “A bull case from here likely shifts the view to 2024, with EPS north of $55, hitting or exceeding the 27% store margin mark.” — CNBC’s Michael Bloom contributed to this report.
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