CREDIT SUISSE: Chipotle is beginning the long road to recovery
Markets Insider
Chipotle just reported it's best quarterly numbers since the 2015 E. coli outbreak cut the company's stock price in half. The stock is responding, rising 4.86% as of 10:20 AM ET.
Credit Suisse analyst Jason West sent a note to clients April 26 raising his price target on the stock to $425 from $375. He reminded investors that the turnaround process is just beginning, and that there is a long and onerous road ahead.
"The pace of recovery should moderate from here as CMG begins to lap more normalized sales and expense trend," West said. "We also continue to believe the cost of customer recapture will be higher than expected, particularly amidst a very tight labor market and increasing competition."
West came to his $425 price target by valuing Chipotle based on "~20x 2018E EV/EBITDA". He gave the stock a higher multiple than the 15X industry average because of Chipotle's 8-9% new restaurant sales growth.
"We believe this pace of recovery is fully embedded in the stock at this price", West said.
In the company's earnings call, Chipotle did report a "payment systems breach," which tempered gains for the stock after the close April 25. Chipotle has not released many details about the breach but Credit Suisse said "this issue could cause a moderate pullback in near-term sales trends."
- Saudi Arabia wants China to help fund its struggling $500 billion Neom megaproject. Investors may not be too excited.
- I spent $2,000 for 7 nights in a 179-square-foot room on one of the world's largest cruise ships. Take a look inside my cabin.
- One of the world's only 5-star airlines seems to be considering asking business-class passengers to bring their own cutlery
- Experts warn of rising temperatures in Bengaluru as Phase 2 of Lok Sabha elections draws near
- Axis Bank posts net profit of ₹7,129 cr in March quarter
- 7 Best tourist places to visit in Rishikesh in 2024
- From underdog to Bill Gates-sponsored superfood: Have millets finally managed to make a comeback?
- 7 Things to do on your next trip to Rishikesh