Chipotle's 2017 Is 'Still A Stretch'

With Chipotle Mexican Grill, Inc. CMG already having pre-announced its Q4:16 results and the guidance still being a “stretch,” Barclays’ Jeffrey A. Bernstein stated that the focus is on the January comp, which was ahead of expectations.

The analyst maintains an Equal-Weight rating on the company, with a price target of $395.

Slower-Than-Expected Recovery

“Importantly, while the long-term recovery is slower than expected, management is encouraged by being able to ‘hold or build on sales’ trends of late, and that the lagging northeast is now in-line with the system,” Bernstein mentioned.

Although Chipotle has been one of the best growth stories in restaurants, the analyst noted that there was persisting lack of visibility into comp re-acceleration, and the company was unlikely to recover to EPS of $15 even in 2018.

Stretch Guidance

However, the company has guided to high single digit comps in 2017, benefiting from lapping of the food safety issue, although compares are expected to be “less easy” through the year.

Bernstein believes the key acceleration drivers for Chipotle include digital ordering and payment, enhanced second make line, TV ads, direct marketing on new and lapsed users and new menu items.

The analyst also believes that the guidance for EPS of $10 and margins of 20 percent are a “stretch,” although neither were formally reiterated. However, the company continued to guide to unit growth of 9 percent and opex/capex of $100 million.

At last check in Friday's pre-market session, shares of Chipotle were up 2.04 percent at $431.95.