What the bad jobs report means for markets
On Thursday, RBC Capital Markets revised its price target for Chipotle Mexican Grill (NYSE:CMG) stock, reducing it to $60 from the previous $65, while continuing to endorse the stock with an Outperform rating. The company, currently valued at $66.8 billion, trades at a P/E ratio of 43.29, suggesting a premium valuation. Logan Reich, an analyst at the firm, provided insights into the company’s first-quarter performance and future projections. According to InvestingPro, 18 analysts have recently revised their earnings expectations downward for the upcoming period.
Reich noted that Chipotle’s first-quarter results fell short of the consensus expectations, attributing the discrepancy to macroeconomic factors that have hindered comparable store growth. Despite challenges, the company maintained revenue growth of 14.61% over the last twelve months. Consequently, the company’s management has revised its fiscal year 2025 guidance to low single digits (LSDs). This new guidance is based on assumptions of a stable macroeconomic environment and a positive customer traffic trend in the second half of the year. Want deeper insights? InvestingPro offers comprehensive analysis with 14 additional key tips for CMG.
Despite the lower-than-anticipated quarterly results, the analyst highlighted a positive development for Chipotle. The limited-time offering (LTO) of Chipotle Honey Chicken has been well received, contributing to a 100-200 basis points increase in customer traffic, as indicated by the firm’s research.
Additionally, Reich mentioned that Chipotle’s reaffirmation of its unit growth guidance and the robust cash-on-cash returns from its new locations provide a buffer against potential risks associated with a slowdown in the expansion pipeline. In light of these factors, RBC Capital Markets has adjusted its estimates and price target for Chipotle Mexican Grill, setting the new target at $60.
In other recent news, Chipotle Mexican Grill’s first-quarter earnings report has drawn attention from several analyst firms, each adjusting their outlooks for the company. Despite Chipotle’s earnings per share surpassing expectations by $0.01, same-store sales fell short, declining by 0.4%. This has prompted Piper Sandler to reduce its price target for the company from $59 to $52, maintaining a Neutral rating. Similarly, Stephens adjusted its price target from $54 to $49, citing challenges in projecting near-term gains due to negative comparable sales in the first half of the year. BTIG also revised its price target down to $60 from $67, although it maintains a Buy rating, noting potential marketing efforts as a positive factor. Raymond (NSE:RYMD) James lowered its target to $58 from $60 but still holds an Outperform rating, highlighting Chipotle’s strong brand and potential for a rebound in the latter half of the year. Chipotle’s management has acknowledged the downturn in transactions and expects a challenging second quarter, with hopes for recovery later in the year. The broader economic environment and consumer spending trends remain critical factors influencing Chipotle’s performance.
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