Where Will Chipotle Stock Be In 1 Year?

Shares of Chipotle Mexican Grill, Inc. (NYSE:CMG) soared about 340% over the past five years and 80% over the past twelve months alone.

The company’s ability to deliver steady financial results despite the industry headwinds and macroeconomic woes has been instrumental in driving the exceptional performance of the stock.

Chipotle’s earnings and revenue for the fourth quarter of 2023 beat analysts’ expectations, with more customers visiting its restaurants. The company’s revenue and adjusted EPS came in at $2.52 billion and $10.36, surpassing consensus estimates by 1.1% and 6.5%, respectively. In fact, the company consistently beat the consensus EPS estimates over the trailing four quarters.

Moreover, the company’s same-store sales rose 8.4% during the quarter, while its foot traffic rose 7.4%, contrary to the trend of declining visits as reported by its major competitors for the last three months of 2023.

Although Chipotle gave investors all the reason to rejoice, the question is whether CMG share price reached its peak or if there’s still room left for growth.

Where Does Chipotle Valuation Currently Stand?

Given its substantial gains in recent years, this stock commands a premium valuation. Its non-GAAP trailing-12-month price-to-earnings (P/E) ratio of 59.95 is much higher than its industry peers. However, the ratio is still about 20% lower than its five-year average.

In terms of trailing-12-month price-earning-to-growth (PEG), it is trading at 1.58x, which indicates that it is priced somewhat higher than what its earnings growth potential justifies.   

Nonetheless, it may make sense to pay a premium for Chipotle stock in the hopes that the company’s fundamentals and growth strategies drive the price even higher.

Digital Ordering Shows Promise

While Chipotle’s digital sales mix fell to 37.4% in 2023 from 39.4% in the prior year, the company reported total digital sales growth of over 8% last year. Chipotle is committed to enhancing its digital offerings, such as improving order processing to increase efficiency.

The company has been expanding its digital presence by adding more stores with mobile pickup lanes, with the number of Chipotlanes expected to exceed 1,000 this year. Chipotlanes had reached 811 in 2023. 

Last year, it upgraded its app with features like order-ready messages, wrong location detection, and reminders to scan loyalty codes for points during checkout and order history. 

Moreover, the burrito brand launched the Freepotle campaign for rewards members, which boosted engagement and attracted new members by offering free rewards like guacamole, a beverage, extra meat, or other items. 

This campaign provided insights about its reward members that could potentially improve customer experiences in the future. Based on reward member data, it also integrated suggestive upselling into its app at checkout. 

CEO Brian Niccol believes in the company’s long-term strategy of leveraging customer data to drive more targeted marketing campaigns and improving the overall digital experience to drive frequency and spending.

Long-term Growth Initiatives On Track

Chipotle plans to open between 285 and 315 new outposts in 2024, up from 271 restaurants last year. It ended the year with a total of 3,437 locations and has set a long-term target of 7,000 restaurants in North America.

A pivotal part of Chipotle’s expansionary strategy is to open new restaurants that cater to a larger customer base. Over the past few years, the company has accelerated the launch of new restaurants, and the momentum is set to continue this year.

In North America, management is aiming for 8-10% restaurant growth per year for the foreseeable future. At least 80% of new openings will have a Chipotlane, a drive-thru lane customized for picking up orders digitally. Its long-term growth goals should boost margins and returns.

For 2024, Chipotle forecasted full-year same-store sales growth in the mid-single-digit range. While cold weather might have hurt sales in January, the underlying demand for the company’s burritos and bowls remains strong and is likely to boost quarterly growth.

Significant operational improvements within the restaurants have also been a focus for management, who said it will invest another $50 million in its Cultivate Next venture fund.

The new funds are expected to help with portfolio expansion through investments in robotics, agricultural market platforms, fertilizer and meatless proteins.

Chipotle is planning an in-restaurant test this year of a robot that scoops avocados, called the Autocado, and an automated make line for its burrito bowls and salads. Both robots have already been tested in the company’s innovation center.

The company is investing heftily in automation as it has been facing a steep increase in labor costs. In California, the wage increases are potentially costing an additional $74 million per year, relative to its costs in the absence of the AB 1228 $20 fast food minimum wage.

Additionally, the wage growth is, in turn, leading to price hikes and is expected to be a major factor in driving further investments in restaurant technology.

Where Will Chipotle Stock Be In 1 Year?

Chipotle stock is likely to rise by 4.2% to $2,732 per share according to the consensus of 29 analysts.

Of all the analysts providing CMG stock ratings, 21 recommend buying it, and 9 advised holding it. Only 1 analyst recommended selling the stock.

While Chipotle might look expensive at the current price level, it may very well still be worth investing in due to the its growth potential and its continued focus on operational efficiency.

Chipotle has a record of delivering strong financial performance, with steady revenue growth, effective cost management, strong brand positioning and digital innovation.

While the stock may witness some pullback in the near term, one can consider every dip an opportunity to accumulate it.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.