Chipotle Mexican Grill (NYSE:CMG) caught our eye as the 5th most upgraded stock in 2021 and the most upgraded name among the restaurants. While we don’t like playing follow the leader with the analysts, we do like it when the analysts are touting the same names we are interested in. In this case, not only is Chipotle Mexican Grill getting a lot of attention from the analysts, we think the outlook for 2022 is underestimating the company’s growth.
The current consensus is for revenue to be flat on a sequential basis to maintain a steady 22% of YOY growth. We believe that this is underestimated because Chipotle is experiencing organic growth and expansion growth while raising prices. The company proved it has pricing power in the last earnings report.
Double-Digit Gains For Chipotle Mexican Grill In 2022
Chipotle Mexcian Grill received 86 upgrades and/or price target increases in 2021 from 28 analysts. The Marketbeat.com consensus sentiment is only a weak Buy, however, which leaves plenty of room for rating upgrades as well as price target increases. The Marketbeat.com consensus price target is $2008 or about 15% above recent price action and it has been moving higher if the sentiment hasn’t. The consensus rating is up 50% in the last 12 months, 7.75% in the last 90 days, and 1.0% in the last 30 and we do see it trending higher into the calendar Q1 2022 period as well.
BTIG analyst Peter Saleh had this to say when he reiterated a buy rating and $2,150 price target after the last earnings report:
“We believe the brand has ample pricing power not only to sustain margins but to grow them in the quarters and years ahead. We expect restaurant margins to expand several hundred basis points over the coming years as the brand raises menu prices, leverages digital and loyalty, and expands its footprint with higher-margin restaurants. While investors were likely disappointed by the 4Q21 margin outlook, coming in about 200-250 bps below consensus, we’re encouraged by sustained traffic gains in the face of double-digit menu pricing.”
Chipotle Mexican Grill Embraces Digital With Chipotlanes
Chipotle Mexican Grill embraced digital even before the pandemic began but has accelerated its efforts in the time since. This includes remodeling old stores and building new ones to include digitally-focused Chipotlane drive-thrus. This quarter's latest concept that is expected to launch is the Chipotlance Digital Kitchen, a drive-thru concept without any seating or front-house operations. The Chipotle digital experience includes the metaverse, as well, with the company opening the first-ever restaurant brand on the Roblox (NYSE:RBLX) platform. Also on tap is the rollout of vegan chorizo nationwide, a move that should drive an incremental gain in revenue by itself.
The Technical Outlook: Chipotle Mexican Grill Is Moving Up From Support
Shares of Chipotle Mexican Grill pulled back from a high in the second half of 202s but has since put in a bottom. The stock bottomed in November and December of 2021 and looks like it is ready to move higher now. Price action has regained the upped side of the short-term moving average, where support is being tested now. Assuming the market follows through on its recent activity, we see shared of CMG moving up to the $1800 and $1900 levels in the very near to near term and then moving higher by the second half of 2022 on strong results. 