Barclays: Chipotle 'Remains An Anomaly"

Jeffrey Bernstein of Barclays was not shy with his opinion on Chipotle Mexican Grill’s CMG earnings results, titling his note, “2Q14 Very Impressive… Higher Highs.”

Growth

Bernstein wrote, “CMG continues to impress, with fundamentals unmatched in the restaurant industry. And importantly, comps accelerated (17% in 2Q14) relative to most peers struggling to report 'positive' trends.”

The report further called Chipotle the best growth story in the restaurant industry and said that +10 percent annual growth is sustainable in the long term.

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Concerns

Although Barclays likes Chipotle’s growth stories, the note cites a key concern: cost control.

“As for prudent industry concerns on food (& labor) inflation,CMG has the traffic and therefore the pricing power to more than offset (6.5% price intact to start 3Q14). The only concern is whether such an outsized increase will negatively impact traffic.”

Valuation

“With most restaurants struggling to drive positive traffic, CMG remains an anomaly, justifying an outsized valuation, with scarcity worth the premium.”

However, as is the concern with many, Bernstein thinks the stock is pricey. He wrote, “we struggle to recommend at current levels... currently ~39x forward (after-hours), relative to the 23-49x 3-year range & 37x average. We are raising estimates... our new price-target is $690.”

The price target increase from $600 to $690 comes after an increase from $580 to $600 last week.

Shares of Chipotle were last trading 12 percent higher at $661.70.