Chipotle Mexican Grill Has A Following Wind Into 2021, Stifel Says In Upgrade

Chipotle Mexican Grill, Inc. CMG deserves credit for its "impressive" resiliency during the COVID-19 pandemic, and the casual fast food restaurant chain should benefit from recent momentum in 2021, according to Stifel.

The Analyst: Chris O'Cull upgraded Chipotle Mexican Grill from Hold to Buy with a price target lifted from $1,400 to $1,500.

The Thesis: The pandemic accelerated the growth of digital ordering and delivery options, and this was apparent in Chipotle's performance, O'Cull said in an upgrade note.

Most notably, digital sales rose from 19.6% of total sales in the fourth quarter of 2019 to 49% of total sales. Over the same time period, Chipotle Rewards members doubled in size to 17 million.

The company noted that customers who take advantage of delivery options are more likely to develop an affinity to the Chipotle brand and will take advantage of other more profitable sales channels, the analyst said. 

Related Link: Chipotle Tests Out Brisket: Where You Can Already Buy The Smoky Goodness

"We anticipate the unprecedented growth in users will
accelerate the company's ability to effectively message key cohorts, such as new and lapsed users, to drive additional visits and support comparable sales growth," he said. 

Chipotle's drive-through channel, "Chipotlanes," is in the early stages of growth and is performing "on par with or ahead of" quick-service burger chains that spent many years building and emphasizing their drive-thru presence, O'Cull said. 

Looking forward to 2021, Chipotle's momentum on multiple fronts will help generate sales growth, especially when the company introduces new menu items that are undergoing testing, like cilantro-lime cauliflower rice, smoked brisket and items exclusive to digital orders like quesadillas, the analyst said. 

CMG Price Action: Shares of Chipotle Mexican Grill were trading higher by 5.08%  Wednesday morning at $1,416.02. 

Photo courtesy of Chipotle.