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On Thursday, Evercore ISI analysts adjusted their outlook on Chipotle Mexican Grill (NYSE:CMG) shares, reducing the price target from $64.00 to $57.00 while retaining an Outperform rating. The firm highlighted that Chipotle is contending with a significant slowdown, as it faces tough year-over-year comparisons from April 2024, which included a 15% increase partly due to the successful launch of Chicken al Pastor and a reaction to substantial price rises during the COVID era by large fast-food chains. According to InvestingPro data, 18 analysts have recently revised their earnings estimates downward, though the company maintains a strong market position with a $66.09 billion market capitalization.
Chipotle’s same-store sales (SSS) growth, which was notably low at 7% over two years in February, showed a slight improvement to 8% in April. Analysts at Evercore ISI anticipate that the two-year SSS trend could continue to modestly improve. The analysis suggests that starting this summer, Chipotle could boost underlying trends, which currently indicate a mere 2% SSS in the second half of the year. The potential growth drivers include increased marketing expenditure, new menu items such as sides or dips, higher investment in digital and social media, and targeted rewards programs. Consequently, Evercore ISI has modeled a second-half SSS growth of 3%, a decrease from the previous estimate of 4% and below the pre-results consensus of roughly 5%. The company currently trades at a P/E ratio of 43.29, reflecting high growth expectations despite near-term challenges.
The commentary from Evercore ISI indicates that despite the challenges, there is an expectation for Chipotle to enhance its performance through various strategic initiatives. The firm’s maintained Outperform rating reflects a positive outlook on the stock despite the reduced price target, suggesting confidence in Chipotle’s ability to navigate the current market conditions and improve its growth trajectory in the near term. InvestingPro data shows the company maintains strong fundamentals with a 14.61% revenue growth and healthy financial metrics. For deeper insights into Chipotle’s valuation and growth prospects, access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Chipotle Mexican Grill reported its first-quarter 2025 earnings, revealing an earnings per share (EPS) of $0.29, which met analyst expectations. However, the company’s revenue fell short of forecasts, coming in at $2.88 billion, approximately $100 million below the anticipated $2.98 billion. This revenue miss was attributed to a decline in same-store sales growth and weaker-than-expected customer traffic. Despite these challenges, Chipotle’s restaurant-level margins slightly outperformed expectations, reaching 26.2%, and the EBITDA margin exceeded forecasts at 20.1%.
Following the earnings report, Goldman Sachs and KeyBanc Capital Markets adjusted their price targets for Chipotle’s stock. Goldman Sachs reduced its target from $69.00 to $57.00 but maintained a Buy rating, while KeyBanc lowered its target from $60 to $58, keeping an Overweight rating. Both firms acknowledged the company’s strong margins despite the revenue shortfall and expressed confidence in Chipotle’s long-term growth potential. KeyBanc attributed its revised outlook to the impact of tariffs and a challenging top-line environment.
Looking ahead, Chipotle management anticipates continued challenges with customer traffic in the first half of 2025 but remains optimistic about several initiatives aimed at improving performance. These include new limited-time menu offerings, increased marketing efforts, and operational improvements. The company is also exploring the expansion of its catering service, which could present a significant growth opportunity. Despite immediate hurdles, analysts from both firms believe that Chipotle’s strategic initiatives and brand strength position it well for future growth.
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