Chipotle Stock Price Targets Raised on Strong Digital Sales

Several Chipotle analysts increased their share-price targets after the burrito chain's results beat estimates. Digital sales jumped.
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Several Chipotle CMG analysts increased their share-price targets as a boost in digital sales sparked by the coronavirus shutdown helped the burrito chain beat first-quarter expectations.

Shares of the Newport Beach, Calif., company at last check were up 6.8% to $840.

Chipotle "is poised to weather near-term headwinds and see accelerated market-share gains in a post-covid environment," said Wedbush analyst Nick Setyan, who raised his price target to $870 from $860.

Sales rose 8% in the first quarter to $1.4 billion and digital sales jumped 81% as customers under stay-at-home orders bought meals online. Digital sales accounted for 26% of Chipotle's total sales during the quarter.

"We continue to view CMG as the best positioned restaurant within our coverage universe (with the exception of Wingstop  (WING) - Get Report) to capitalize on digital/delivery growth," Setyan said. 

Like other fast-food chains, Chipotle shuttered its restaurants in mid-March and shifted strictly to takeout and delivery to comply with social-distancing requirements. The company also withdrew its fiscal 2020 guidance.

Credit Suisse analyst Lauren Silberman raised her price target on Chipotle to $940 from $900.

She told clients in a note that "despite near-term choppiness, CMG remains confident in its ability to return to pre-covid levels, supported by its previous experiences, enhanced food-safety infrastructure, strong digital ecosystem and solid balance sheet." 

"We continue to view CMG as among the best growth stories in restaurants, with expectations for a return to strong [same-store sales], margin expansion and 20% to 30% earnings-per-share growth," she said.

Analysts at Stifel Nicolaus raised their price target on the company to $750 from $715, while KeyBanc Capital analysts boosted their target to $955 from $790.

"Chipotle delivered better-than-expected first-quarter 2020 results despite unprecedented levels of industry volatility," Piper Sandler analyst Nicole Miller Regan said. 

The results "highlight how much of an asset a strong presence in the digital and delivery channels can be in the current environment and underscore how crucial Chipotle's investments in and around the stage gate process, digital channel, and human capital have been and how much of a differentiator they can be going forward."

Separately Chipotle will pay $25 million to resolve criminal charges related to the company's involvement in food-borne-illness outbreaks that sickened more than 1,100 people between 2015 and 2018.

The company entered into a deferred-prosecution agreement that allows it to avoid conviction by continuing to improve its food-safety program, federal prosecutors said, the Associated Press reported.