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the Chipotle Mexican Grill (NYSE: CMG) The share price is rising this week amid receiving positive coverage from analysts on Monday.
Shares of the fast food brand are currently up 2.92% from yesterday’s close and 5.44% over the past five days. It seems that the recent upgrade has given the bulls an impetus to sustain the rally to the upside.
The rise in Chiptole’s share price also coincides with a rally in the broader markets. The S&P 500 is up 3.08% from yesterday’s close after hitting a low on January 19, which has lifted it 0.51% over the past five days.
Markets rally ahead of earnings season, as well as signs of easing inflation in the US. This, in turn, gives hope to investors that the Federal Reserve will engage in more dovish monetary policy, putting pressure on stocks and reducing the chances of the US slipping into a recession.
Let’s take a look at some recent analyst coverage for Chipotle.
What did the analysts say?
Wells Fargo & Company (NYSE: WFC) published a research note on Monday that gives an overweight rating to a serving of Chipotle.
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The rating largely reflects Wall Street’s opinion of the stock. Currently, 23 analysts are rating it a Buy, giving it a Moderate Buy rating. the MarketBeat The agreed price target also shows some tangible potential at the time of writing, showing a gain of 13.46%.
Part of the overweight rating also means Chipotle will outperform its segment peers. With this in mind, the retail and wholesale companies have a consensus rating from analysts. It should be noted that on a price-to-earnings (P/E) basis, Chipotle is more expensive than its peers in the same segment. The company’s P/E multiple is 55.60, while the sector’s P/E multiple currently stands around 44.45.
How will Chipotle perform in the future?
Earnings per share (EPS) is expected to grow from $33.34 to $42.58 per share for a sizable growth of 27.71% in the coming year. Chipotle has experienced impressive growth over the past five years, with revenue increasing at a compound annual growth rate of 14%.
Portions of the stock’s fundamentals are also getting stronger. The company currently has 3,090 stores and plans to open 235 to 250 new stores this year, with 270 stores scheduled to open in 2023.
Several factors led to the growth of Chipotle. Its innovative menu, use of technology, and focus on sustainability have helped set it apart from its competitors. This, combined with strong operational execution and well-executed marketing campaigns, has enabled it to capture market share and drive same-store sales growth.
Is Chipotle a Good Recession Hedge?
During a recession, people are more likely to turn to fast food restaurants as a cheaper alternative to dining out. This could help Chipotle’s sales stay strong even in an economic downturn. In addition, the company has recently begun to expand its delivery services, which could help it capture a larger share of the fast food market.
Chipotle’s management team also has a proven track record of making prudent investments and taking calculated risks. This, along with the company’s low debt and strong balance sheet, makes it a relatively safe investment. The company has increased cash flow annually since 2019 and currently stands at $1.076 billion. Meanwhile, the Total debt in the last quarter was 3.729 billion.
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Chipotle Mexican Grill is part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
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