Chipotle Can Navigate Food Cost Concerns, Menu Price Increases: 4 Analysts React To Earnings Report

Rising food costs, menu price increases and store growth were the big topics highlighted by analysts who cover restaurant company Chipotle Mexican Grill, Inc. CMG. Here are the key analyst takeaways. 

The Chipotle Analysts: Morgan Stanley analyst John Glass had an Overweight rating and raised the price target on Chipotle from $1,903 to $1,904.

Raymond James analyst Brian Vaccaro had an Outperform rating and price target of $1,850.

Wedbush analyst Nick Setyan had an Outperform rating and a $2,000 price target.

KeyBanc analyst Eric Gonzalez had an Overweight rating and a price target of $1,900.

Related Link: 5 Things You Might Not Know About Chipotle Mexican Grill CEO Brian Niccol

The Analyst Takeaways: Morgan Stanley's Glass called Chipotle one of the few companies able to “navigate the current cost environment” in an updated note on the restaurant company.

“Against concerns that forward margin estimates were too aggressive, and the opposite likely true, leaving room for an estimate to rise — a rare thing in restaurants these days,” Glass said.

While food costs and overall costs hurt margins in the first quarter, the analyst pointed to several of these items normalizing recently.

Better than expected comparable sales were a key highlight for Raymond James' Vaccaro from Chipotle in the first quarter.

“Management stressed it continues to see little resistance to recent menu price increases and 2Q comp guide implies average unit volumes,” Vaccaro said.

The analyst noted that the average unit volume guidance is post-COVID-19 highs. Pricing benefits from the company are helping to fight off increased food costs.

Growth for Chipotle could come from menu price increases, menu innovation and loyalty membership increases, Wedbush's Setyan said.

“We believe CMG is poised to see accelerated market share gains in a post-COVID environment, resulting in sustained growth above pre-COVID levels,” Setyan said.

The analyst highlighted the company reporting 48 net new units opened in the first quarter and annual growth guidance of 8% to 10%.

KeyBanc's Gonzalez saw Chipotle as able to manage increased food costs going forward, but is cautious about the company’s menu mix.

“While traffic is likely to stay positive as y/y comparisons ease, average entrees/order will weigh on mix as customers shift away from delivery towards the dine-in and carryout channels,” Gonzalez said.

CMG Price Action: Chipotle shares were up 2.60% to $1,475.63 on Wednesday at market close.

Photo: Courtesy Chipotle