Chipotle Price Target Up to $1,100 at Piper Sandler

Piper Sandler raises its price target for Chipotle to $1,100 from $850.
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Piper Sandler raised its share-price target for Chipotle Mexican Grill  (CMG) - Get Report to $1,100 from $850, praising the burrito chain operator's flexibility as consumer behavior changes due to the coronavirus pandemic shutdown.

The shares of the Newport Beach, Calif., company at last check were up 2.2% to $922.

Analysts Nicole Miller Regan, who affirmed her overweight rating on the stock, said in a note to clients that Chipotle's results "continue to be an excellent proxy of the power of aligning human and financial capital investments to achieve success."

"Management is operating from a more proactive position and showing flexibility around changing consumer behaviors," Regan said. 

Chipotle has about $900 million of cash on hand and recently closed on a $600 million line of credit that remains undrawn, the analyst said. 

Chipotle also has no plans to have long-term debt permanently on the balance sheet, Regan added, and "management has long suggested $500+ million of available capital is more than enough."

"This is not the point, but serves to draw attention to the resources available for the company to continue to make human capital, digital and unit development investments," she said. 

"The point would be then even in what is pleasantly defined as a dynamic situation, Chipotle is executing off-premise transactions that translate to a nearly $2 million average unit volume; which is materially better than peers pre-crisis."

The analyst said digital sales were about "20% previously compared with more than 70% of sales today, and remain evenly split between rapid pick up and delivery," as Chipotle saw a spike in digital sales due to quarantine and social-distancing requirements.

"The digital platform may also prove powerful as a product offering tool as consumers' expectations adjust and change based on which sales channel they tap into," she said.