Oppenheimer sees ‘attractive’ risk/reward and Q1 beat for Chipotle Mexican Grill

By Sam Boughedda 

Oppenheimer lifted its price target on Chipotle Mexican Grill (NYSE:) to $1,940 from $1,875, maintaining an Outperform rating on the stock in a note to clients on Tuesday.

Oppenheimer analysts told investors that CMG, which has gained 1% so far on Tuesday, has been a top restaurant outperformer in 2023, with shares up +24% year-to-date compared to the S&P’s +7%.

“Despite improving sentiment, we remain attracted to CMG’s risk/reward following our updated analysis into 1Q23 earnings (4/25),” they wrote. “We model a 1Q23 EPS beat and identify a compelling path for earnings upside vs consensus through 2024.”

They also explained that the firm believes traffic trends have flipped positive and “contain powerful accelerators as ’23 unfolds via improving throughput and a beneficial comparison ease.”

In addition, the analysts believe accelerating unit growth “appears under-appreciated funded with a debt-free balance sheet.”

“Path for accelerating traffic appears under-appreciated, particularly as traffic/mix comparisons ease by 500bps in 2H23 (vs 1H23) as the model laps last year’s weakness when delivery meaningfully declined,” they said. “Transactions turned positive in 1Q23, yet consensus assumes only minor traffic improvements as ’23 unfolds. We believe this doesn’t properly incorporate accelerating throughput benefits, strengthening in-store sales and easing comparisons.”