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Chipotle Stock Wavers; Goldman Sachs Affirms Buy Rating

Chipotle Mexican Grill stock wavered on Wednesday after analysts at Goldman Sachs maintained a buy rating and $2,105 price target.
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Chipotle Mexican Grill  (CMG) - Get Chipotle Mexican Grill, Inc. Report wavered on Wednesday after analysts at Goldman Sachs maintained a buy rating and $2,105 price target on the stock ahead of the burrito chain's third-quarter-earnings report. 

Goldman Sachs is broadly bullish on the Newport Beach, Calif., company's future, but it expects third quarter top- and bottom-line results to come in below consensus analyst estimates.

The investment firm expects Chipotle to report revenue of $1.93 billion for the quarter. Analysts polled by FactSet are estimating revenue of $1.94 billion. 

Goldman expects earnings of $6.11 a share vs. consensus expectations of $6.31. 

The firm notes that comparable-store sales at Chipotle's urban stores were stronger than those of the suburban locations for the first time since the pandemic began. 

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Customers continued to order online, and in-store sales recovered as consumers were more comfortable showing up at restaurants, analysts Jared Garber, Michael Rothstein and David Nguyen said in a report.

Resurgent Covid may have hurt this progress a bit, particularly in August. But "Covid-19 delta-variant cases began to decelerate in early September (and continue to fall), and workplace mobility trends continue to improve, especially in key urban centers, supporting a reacceleration in trends," they said.

Inflation is an issue. "Gross margins could see pressure from commodity inflation, particularly if protein spot purchases are necessary to keep up with elevated demand," the analysts said.

Labor costs should also continue to rise with the progression of 2Q’s wage hike along with higher staffing and training levels as employee counts normalize near pre-Covid-19 levels," they said.

Chipotle shares Wednesday closed 0.4% higher at $1,810.55. 

Chipotle is scheduled to report earnings on Oct. 21.