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Investing.com -- BMO Capital Markets upgraded Chipotle Mexican Grill (NYSE:CMG) to Outperform and raised its price target to $65, citing expectations for a rebound in same-store sales and restaurant margins in the second half of 2025.
The brokerage expects Chipotle’s recent underperformance to reverse as comps turn positive after two quarters of decline, helped by easier comparisons, a recovery in traffic, and ongoing marketing and throughput initiatives.
While BMO did not lift its comp forecasts, it said internal data suggest potential for over 3% growth in the second half, in line with consensus but with room for upside.
Margins are also projected to improve as the company laps higher food costs tied to portion size increases and begins to see benefits from operational efficiencies.
BMO expects margins to stabilize in the third quarter and expand by about 50 basis points in the fourth.
The firm acknowledged potential cost pressure from aluminum tariffs but said Chipotle retains pricing flexibility and efficiency levers to manage the impact.
Chipotle shares have lagged broader restaurant peers this year, down 11% year-to-date.
BMO said current valuation does not fully reflect the expected improvement in fundamentals and assigned a price target based on a 45 times earnings multiple, consistent with historical averages.
The upgrade is not tied to second-quarter results, which BMO expects to show another decline in same-store sales and continued margin compression.
Still, it sees the quarter coming in largely as expected and believes investor focus will be on current-quarter trends and management’s outlook for margin recovery.