3 Reasons Why Chipotle's Stock Could Hit $1,650

Shares of Chipotle Mexican Grill, Inc. CMG more than tripled from 2020 lows, but the three catalysts ahead make the case for further appreciation in the stock, according to RBC.

The Chipotle Analyst: Christopher Carril upgraded Chipotle's stock from Sector Perform to Outperform with a price target lifted from $1,320 to $1,650.

The Chipotle Thesis: The case for upside in the stock are:

1. Comp And Unit Growth: Chipotle could exceed the Street's estimates for 11% comp growth in 2021 due to new menu innovation, market share gains as the restaurant offers superior quality and value versus its fast-food peers, the ability to directly target the 17 million digital loyalty members. 2021 could also see an acceleration in new unit growth from around 150 annually in recent years to around 200 units.
2. Margin Expansion: Chipotle's eventual return to pre-COVID cost structures will result in a return to near-peak margin levels. By 2022, restaurant-level margins could come in at 23% on $2.6 million average unit volume versus 20% RLM at $2.0 million AUV today.
3. ESG Investors: Investors looking for exposure to companies that best exemplify ESG (environmental, sustainability, governance) could shift to Chipotle's stock. The company offers the highest levels of ESG disclosures among its peers, including quantifiable targets.

CMG Price Action: Shares of Chipotle hit a new all-time high Thursday at $1,453.50 and were up more than 2.8% at publication time.

Photo credit: Chis Potter, Flickr