CMG Stock Has Likely Bottomed: Analyst
Chipotle Mexican Grill, Inc. (NYSE:CMG) stock has likely bottomed and shares could have as much as 37% upside from current prices. At least, that’s according to Goldman Sachs.
CMG stock has taken a hit since October, falling about 40%. But things may start to be looking brighter for Chipotle in 2016. Goldman Sachs’ analysts set a 12-month price target of $550.00, revised from $600.00, but maintained a “Buy” rating. The note added that despite the drop, earnings surprised. Earnings for the fourth quarter were guided in the range of $1.70 to $1.90 but came in higher than expected at $2.17.
Chipotle stock has traded lower over the past few months after an E. coli outbreak hit its restaurants last October and caused 55 people to fall ill. Same-store sales in January plunged 36% year-over-year, while sales for the fourth quarter dropped 14.6%.
Goldman Sachs’ analysts wrote, “What’s changed: Helped by a reversal in restricted stock accounting, CMG reported a better than expected 4Q; however, the real focus was on 2016 commentary. There were a number of negatives on the cost front…with very little encouraging comments on the top-line front.” (Source: “Goldman Likes Chipotle’s Long-Term Value, Sees $550 Per Share,” Benzinga.com, February 3, 2016.)
The Goldman Sachs’ analysts also noted that marketing initiatives by Chipotle to win back customers can be quickly effective in tempering the bad news it has endured the last few months. The analysts added that the long-term valuation remains compelling and any positive sales updates can send shares back up.
Long-term, Goldman Sachs’ analysts value CMG stock above $630.00.
Goldman Sachs isn’t the only investment bank bullish on CMG stock. Wells Fargo analyst Jeff Farmer is also positive on CMG stock. Farmer has upgraded shares from “Market Perform” to “Outperform.” (Source: “Chipotle Mexican Grill: Is It Time to Buy?” Barron’s, February 3, 2016.)
He cites two decades of food safety case studies, which concluded that restaurants that have experienced similar outbreaks see same-store sales return to sustained growth within 12 to 15 months when first reported and that the stock price follows in tandem.