BMO maintains Chipotle stock at market perform with $56 target

On Thursday, BMO Capital Markets maintained its Market Perform rating on Chipotle Mexican Grill stock (NYSE:CMG) and reiterated its price target of $56.00. The firm’s analysis pointed to challenges faced by the company, including a decline in customer traffic due to broader consumer pressures. According to InvestingPro data, 18 analysts have recently revised their earnings expectations downward for the upcoming period, while the stock currently trades at elevated multiples across various metrics, suggesting potential valuation concerns. Despite this, Chipotle’s first-quarter earnings per share (EPS) of $0.29 managed to exceed expectations by $0.01, attributed to reduced costs of goods sold (COGS), general and administrative expenses (G&A), a lower tax rate, and a decrease in the number of shares.

Chipotle experienced a downturn in transactions starting in February, which persisted into April. This led the company to revise its 2025 comparable sales growth (comp) guidance to a low single-digit percentage (LSD%), contrasting with the previous consensus of +3%. The updated forecast anticipates transaction growth to turn positive after the second quarter of 2025. However, this outlook is predicated on a stable macroeconomic environment, with the implication that holding to a two-year stack could result in a 0-1% comp in 2025.

In light of the sales and margin pressures, BMO Capital has adjusted its estimates for Chipotle. Nevertheless, the firm’s price target remains unchanged as it transitions its valuation methodology to the year 2026. The analyst from BMO Capital emphasized the impact of elevated consumer uncertainty on Chipotle’s business, noting that the guidance suggests the second quarter of 2025 could represent the lowest point for the company’s performance metrics.

The analyst’s comments reflect the broader challenges faced by the restaurant industry as consumer spending habits shift amidst economic headwinds. Chipotle, like many other companies in the sector, is navigating a complex landscape where transaction growth and customer retention are paramount to achieving financial targets. Despite the near-term challenges, BMO Capital’s steady price target suggests a view that Chipotle’s fundamentals may support its market performance in the longer term. InvestingPro data reveals the stock has delivered strong returns over both the last five and ten years, with analysts maintaining a positive consensus recommendation. For deeper insights into Chipotle’s valuation metrics, growth potential, and comprehensive financial analysis, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.

In other recent news, Chipotle Mexican Grill’s first-quarter earnings report revealed a dip in same-store sales by 0.4%, slightly missing market expectations. The company cited reduced consumer spending as a contributing factor and noted that this trend might continue into the second quarter. Analysts from Piper Sandler, Stephens, BTIG, Raymond (NSE:RYMD) James, and Evercore ISI have all adjusted their price targets for Chipotle, reflecting mixed sentiments about the company’s near-term prospects. Piper Sandler and Stephens have lowered their targets to $52 and $49, respectively, while maintaining neutral ratings. BTIG reduced its target to $60 but kept a Buy rating, highlighting potential positive impacts from upcoming marketing efforts. Raymond James and Evercore ISI also lowered their targets to $58 and $57, respectively, but maintained Outperform ratings, expressing optimism about Chipotle’s long-term prospects. Analysts noted that Chipotle’s challenges include a competitive restaurant landscape and macroeconomic uncertainties. However, there is an expectation for improved performance in the latter half of the year, driven by increased marketing, new menu items, and strategic initiatives.

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