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With a market cap of approximately $85.4 billion, California-based Chipotle Mexican Grill, Inc. (CMG) is redefining fast-casual dining with responsibly sourced, real food made without artificial additives. With over 3,600 restaurants spanning the U.S., Canada, Europe, and the Middle East, Chipotle is the only restaurant of its size to own and operate all its locations across North America and Europe.
Shares of this restaurant chain have rallied 40.4% over the past year, outshining the broader S&P 500 Index’s ($SPX) 31.8% return during the same time frame. Plus, in 2024, CMG stock is up roughly 35.7%, leaving behind the SPX’s 25.8% return on a YTD basis.
Narrowing the focus, CMG stock appears to have also outperformed the Consumer Discretionary Select Sector SPDR Fund’s (XLY) healthy gains of 30.6% over the past 52 weeks and 23.1% return on a YTD basis.
The restaurant industry is notoriously competitive, with low barriers to entry and virtually no switching costs for customers. Yet, Chipotle's outperformance is evidence that the company stands out as a powerhouse in this crowded space. Known for its freshly prepared food at reasonable prices, Chipotle has solidified its brand as a fast-casual pioneer. Its proven pricing power, demonstrated by successful menu price increases multiple times over the past years to counter inflation, highlights the strength of its value-driven reputation.
However, despite the company’s strong price action over the past year and solid brand recognition, shares of Chipotle took a nosedive, plunging more than 7% on Oct. 30 after the company disclosed its Q3 earnings results on Oct. 29, which revealed a mixed picture. While the company’s adjusted EPS of $0.27 topped Wall Street forecast by almost an 8% margin, its revenue of $2.8 billion narrowly fell short of street estimates, triggering a negative market reaction.
For the current fiscal year, ending in December, analysts expect CMG’s EPS to increase 23.3% year over year to $1.11. The company’s earnings surprise history is promising. It surpassed the consensus estimates in each of the last four quarters.
Among the 31 analysts covering the stock, the consensus view is a “Moderate Buy,” which is based on 20 “Strong Buy,” two “Moderate Buy,” and nine “Hold” ratings. This configuration has remained steady over the past three months.
On Nov. 15, RBC maintained an “outperform” rating on Chipotle with a price target of $70, which implies a potential upside of roughly 12.8% from current price levels.
The average analyst price target of $66.35 indicates only a 7% potential upside from the current price levels, while the Street-high price target of $74 suggests that CMG could rally as much as 19.3% from here.
