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On Thursday, Goldman Sachs analyst Christine Cho adjusted the price target for Chipotle Mexican Grill (NYSE:CMG) stock, reducing it to $57.00 from the previous target of $69.00, while still maintaining a Buy rating on the shares. According to InvestingPro data, analyst targets currently range from $46 to $72, with 18 analysts recently revising their earnings estimates downward. Cho’s analysis followed Chipotle’s first-quarter earnings report, which showed an adjusted earnings per share (EPS) of $0.29. This figure was closely aligned with the Goldman Sachs and Visible Alpha Consensus Data estimates of $0.28.
The company’s quarterly earnings highlighted weaker-than-anticipated customer traffic, which fell by 2.3% compared to the Goldman Sachs and consensus forecast of 0.1% and 1.1% decline, respectively. This resulted in a significant slowdown in same-store sales growth (SSSG), which was -0.4% for the first quarter, a stark contrast to the +5.4% growth seen in the previous quarter. Despite these challenges, InvestingPro data shows Chipotle maintained strong revenue growth of 14.61% over the last twelve months, with total revenue reaching $11.3 billion. The quarterly revenue of $2.88 billion fell short of both Goldman Sachs and consensus estimates by 4% and 2%, even though new unit growth was on par with expectations.
Despite the revenue miss, Chipotle’s costs were generally lower than anticipated, which led to a slight outperformance in restaurant-level margins at 26.2%, compared to the 25.9% predicted by Goldman Sachs and consensus. Additionally, the EBITDA margin came in at 20.1%, exceeding the expectations of 19.5% and 19.4% from Goldman Sachs and consensus, respectively.
Looking ahead, Chipotle’s management conveyed a cautious outlook regarding short-term trends, anticipating that customer traffic might continue to decline in the first half of 2025 due to heightened uncertainty affecting consumer spending. However, they also identified several initiatives that could positively impact the brand’s performance. InvestingPro analysis indicates the company maintains a strong financial position with a "GOOD" overall health score, supported by liquid assets exceeding short-term obligations and moderate debt levels. For deeper insights into Chipotle’s financial health and extensive analysis, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers. These include the continued success of the Chipotle Honey Chicken limited-time offer (LTO) and an upcoming side/dip LTO set for this summer, increased marketing efforts to enhance brand awareness, and operational improvements from investments in back-of-house processes.
Furthermore, the company is exploring the expansion of its catering service, which currently represents only 1.5% of sales, by testing it in one region. This could potentially become a significant opportunity for the brand’s long-term growth. Despite the immediate challenges, the analyst believes that Chipotle’s long-term prospects remain strong, with the brand expected to outperform its peers in terms of top-line growth and benefit from operational efficiencies driven by back-of-house initiatives. With these factors in mind, Goldman Sachs sees a 17% upside to the newly set 12-month price target of $57 and reiterates its Buy rating on Chipotle stock.
In other recent news, Chipotle Mexican Grill reported its Q1 2025 earnings, revealing an earnings per share (EPS) of $0.29, which met analyst expectations, but the company’s revenue of $2.88 billion fell short of the forecasted $2.98 billion. This revenue miss has raised concerns among investors, especially given the company’s historical growth trajectory. Despite the revenue shortfall, digital sales accounted for 35.4% of total sales, indicating a strong digital presence. KeyBanc Capital Markets responded by reducing its price target for Chipotle to $58 from $60, although it maintained an Overweight rating, showing confidence in the brand’s long-term potential. The firm highlighted Chipotle’s strategic initiatives, such as marketing efforts and menu innovations, as positive steps towards overcoming current market challenges. Additionally, Chipotle plans to open 315-345 new restaurants in 2024, signaling ongoing expansion efforts. The company also aims to increase marketing spend over the summer to enhance visibility and consumer engagement. These recent developments indicate Chipotle’s focus on navigating economic uncertainties while maintaining its growth trajectory.
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