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Analysts Set New Chipotle Target Stock Price Ahead of Earnings Release
That's what could happen to Chipotle stock next.
The rationale behind fast food restaurants is very simple: you do not have to wait for a long time, you do not have to cook for yourself, and you do not have to spend so much money.
However, for several of the largest chains, cost has become an issue.
About a quarter of low-income consumers, defined as those earning less than $50,000 a year, said they ate fast food less often, and about half said they visited fast-food restaurants and full-service dining establishments less often, Reuters reported, citing a survey by consulting firm Revenue Management Solutions.
Chains may not be chasing customers as much as they used to, as sales remain steady even with declining traffic, supported by higher prices.
Mike Lukianoff, chief executive officer of SignalFlare.ai and a consultant to the fast-food industry, told Reuters that fast-food companies "aren't as eager to put traffic over profits as they were a decade ago."
The executives of some of these companies admit that they are having trouble attracting low-income customers.
"Eating at home has become more affordable," McDonald's chief executive resonator Chris Kempczinski told analysts in February. The battleground has been low-income consumers.
Darden Restaurants with brands such as Olive Garden, LongHorn Steakhouse (DRI) Corporate President of Artefacts and Chief Executive Officer Ricardo Cárdenas (Ricardo (Cardenas) told analysts on the company's earnings call, "Low-income consumers do seem to be returning, and the guest profile based on revenue is now consistent with the pre-vodka period."
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Chipotle 'doing well' in low-income groups
According to the most recent U.S. Census data, about one-third of Black American households and 21% of White American households will have incomes below $35,000 in 2022.
Chipotle.CMG) It seems to be one of the fast food restaurants that follows this trend.
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Stifel analyst resonance Chris O'Cull addressed the low-income issue in an investor note, raising the investment firm's price target on Chipotle stock to $3,270 from $2,700, 鈥竝hen he confirmed a buy rating.
O'Cull said the company evaluated the year-over-year traffic performance of several restaurant chains and found mixed results.
The company's analysis corroborates recent comments made by McDonald's and Olive Garden management that Starbucks Resonance (SBUX) There are also challenges for low-income customers. However, he also said that from Chipotle to Chili's ("Chili's"), there are still some challenges.EAT) Pre-prandials, such as several restaurants, seem to be performing well in this income group.
Chipotle is scheduled to report first-quarter earnings on April 24, and the FactSet consensus estimates call for Chipotle to report earnings of $11.60 per share on revenue of $2.68 billion.
In February, Chipotle reported fourth-quarter earnings of $10.36 per share, compared with $8.29 in the same period last year. The latest figure exceeded the FactSet consensus estimate of $9.71 per share. Total revenue was $2.52 billion, up from $2.2 billion in the same period last year and above FactSet's forecast of $2.49 billion.
Revenue growth was driven by an 8.41 TP3T increase in comparable pre-prandial sales, the company said, adding that the comparable figures reflect a 7.41 TP3T increase in transaction volume and an 11 TP3T increase in average check rate.
A month later, on March 19, Chipotle's board of directors announced a 50-for-1 stock split, which the company said was one of the largest stock splits in the history of the New York Stock Exchange.
This is Chipotle's first stock split in 30 years of business and comes at a time when "our stock is at record highs driven by record revenues, profits, and growth," said matriarchal CFO Jack Hartung.
The stock split is subject to shareholder approval and is expected to take place in June.
At the time, analysts at Deutsche Bank reiterated their Buy rating. They said Chipotle is one of the best-performing restaurant stocks, and they have "high confidence in CMG's near- and long-term growth prospects."
Analysts say it has a 'healthy balance sheet'
Analysts have been evaluating the Newport Beach, California-based company's target stock price ahead of its earnings release.
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Stephens restated its rating on Chipotle with equal weight and a price target of $3,010.
Chipotle stands out from its fast food peers through best-in-class execution. The company says its stores have impressive unit economics, while its digital offerings continue to expand.
The company added that its strong balance sheet also supports the continued funding of additional units and the return of cash to曏 holders through the Share Repurchase Program.
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However, Stephens notes that the company's stock trades at an enterprise value multiple of 35 times expected earnings before interest, taxes, depreciation and amortization for the next 12 months. On that basis, its 10-year average multiple is 23.5 times.
UBS analyst Dennis Geiger raised his price target on Chipotle from $2,900 to $3,400 and reiterated his Buy rating.
Geiger said he utilized a recent fast-food restaurant survey of about 2,000 consumers conducted by the UBS Evidence Lab to help assess traffic drivers and the sustainability of traffic growth momentum.
He said the company believes Chipotle will maintain consistent traffic and sales momentum, supported by near- to long-term growth catalysts, including increasing visits, solid food quality and value attributes.
TD Cowen analyst Andrew Charles raised his price target on Chipotle from $2,900 to $3,400 and maintained a Buy rating on the company.
The analyst said he expects Chipotle to report a "clean" first-quarter report, 鈥竝he raised his same-store sales forecast to 4.51 TP3T from 3.51 TP3T, which is in line with Wall Street's consensus.
In a research note, the analyst told investors that a panel of casual dining industry executives believe that the sales and margin environment in the fast-food industry was favorable in the first quarter, adding to TD Securities' confidence in the subsector.
At current valuation levels, the company believes it is more important to increase its 2024 adjusted EBITDA guidance to sustain near-term growth. TD Securities believes that Shake Shack SHAK, Sweetgreen SG and Cava Group (CAVA) We will be most confident in doing so.
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