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Chipotle Stock Up; UBS Target to $2,100 on 'Multiple Catalysts'

UBS analysts lift their price target on Chipotle, saying the burrito chain is 'positioned for elevated sales growth.'

Chipotle Mexican Grill  (CMG) - Get Free Report appears "positioned for elevated sales growth," according to UBS analysts, who raised their price target on the burrito chain to $2,100 from $1,850.

Shares of the Newport Beach, Calif., company at last check were 0.5% higher at $1,837.72.

Analyst Dennis Geiger, who has a buy rating on the company, sees "further upside' for CMG shares "given multiple catalysts to support continued comp momentum near and longer term, accelerating unit growth, and margin expansion."

"CMG appears positioned for elevated sales growth over the balance of '21 and (long-term,) given continued digital gains, loyalty expansion, new menu items, and a further recovery in dine-in traffic and throughput opportunities," Geiger said.

The price-target increase, he said, reflects "ongoing sales momentum, expectations for little resistance to pricing increases, and greater confidence in drivers to support elevated go-forward sales growth."

While the analyst said that margin pressures from labor and commodity inflation are likely to persist near term, he expected pricing (with little resistance) and revenue strength can mitigate the impact to EPS.

Geiger said he anticipated "solid consumer demand for recently launched smoked brisket," which should "support momentum" into the fourth quarter.

"We expect CMG to continue its disciplined approach to menu innovation, including the release of about two to three new items per year, following rigorous consumer tests and feedback in the stage-gate process," he said. 

"CMG has already released three new products this year (cauliflower rice, quesadilla, and brisket) that have been well received."

Geiger said that Chipotle's menu innovation pipeline and development/testing process "should support a compelling new product lineup to drive traffic and sales over the coming years."

In addition, the analyst said, Chipotle's digital sales growth and contribution remain significant, "representing a significant sales unlock and improving convenience and customer accessibility across multiple sales channels."

In July, Chipotle posted reported stronger-than-expected results for the second quarter. The company is scheduled to report third-quarter results on Oct. 21.