Analysts weighed in today on the Mexican fast food giant Chipotle Mexican Grill, Inc. (NYSE:CMG), Online payment giant Paypal Holdings Inc (NASDAQ:PYPL) and mobile chip giant Qualcomm, Inc. (NASDAQ:QCOM). Here’s a quick roundup of today’s brokerage notes on CMG, PYPL, and QCOM.
Chipotle Mexican Grill, Inc.
Deutsche Bank analyst Karen Short reiterated a Hold rating on shares of Chipotle, while slashing the price target to $525 (from $710), based on her expectation for limited earnings upside near-term. At this point, the analyst believes that Chipotle’s shares are largely fairly valued.
Short commented, “When news first broke surrounding the E. coli scare at the 43 CMG units in the Pacific Northwest, we felt it was too early to adjust our model at that time. Given the prolonged and broadened nature of this issue, we believe it is fair to assume weakened brand sentiment may persist over several quarters and therefore believe consensus estimates do not fully reflect the potential negative impact of these events.”
The analyst continued, “Our Reasons are threefold. First, CMG has traditionally had a health and quality “halo” that we believe is more susceptible to E. coli headline risk. While prior food safety incidents across the traditional QSR and casual dining landscapes may not be entirely comparable for modeling purposes, we believe they are illustrative because Chipotle could face a meaningful hit to its brand equity and therefore comps could be pressured for several quarters until favorable consumer perception is restored. Second, SSS trends were already slowing following CMG’s impressive SSS trends from 2Q13 to 1Q15, during which time the company took as much as ~+6%+ pricing. This helped create challenging sales comparisons and may have contributed to a recent flattening out of traffic, in our opinion. Third, despite consumers’ ability to customize CMG’s menu, a limited slate of new product introductions could be driving some “menu fatigue”, which coupled with a growing competitive set may be weighing on near-term results.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Karen Short has a yearly average return of 9.7% and a 69% success rate. Short is ranked #338 out of 3631 analysts.
Paypal Holdings Inc
In explaining his positive Buy rating, Keane said, “PYPL remains in an enviable position within the mobile payments landscape as it has a defensible asset in its two sided network with scale at both the consumer (173m active customer accounts) and merchant (~10m active merchants) level. The key differentiators of PYPL for the merchant include its large customer base, high sales conversion rate and fraud protection, while the consumer benefits from trust, availability, and ease of use. As a result of its ubiquity, PYPL is well positioned to capture market share from the escalating growth of digital volumes vs. the new/ traditional competition. ComScore is reporting CyberMonday sales increases of 21% yoy, with mobile transactions contributing 27% of online sales up 53% yoy. Despite intermittent interruptions being reported on PYPL site Monday, we believe PYPL saw a strong “cyber November.”
According to TipRanks.com, analyst Bryan Keane has a total average return of 15% and a 75.9% success rate. Keane has a -0.3% average return when recommending PYPL, and is ranked #122 out of 3631 analysts.
Out of the 23 analysts polled by TipRanks in the last 3 months, 14 rate Paypal stock a Buy, 7 rate the stock a Hold and 2 recommend a Sell. With a return potential of 18%, the stock’s consensus target price stands at $41.90.
Pacific Crest analyst Michael McConnell initiated coverage on shares of Qualcomm, with an Overweight rating and price target of $64, which represents a potential upside of 22% from where the stock is currently trading.
McConnell noted, “We would be buyers of QCOM because: (1) valuation appears to discount the midpoint of QTL guidance for F2016 with no value ascribed for QCT, (2) catchup QTL sales could add $0.32 in EPS, (3) QCT sales and margin seem likely to trough in F2Q16, and (4) optionality on its ongoing structural/financial review is favorable,”
According to TipRanks.com, analyst Michael McConnell has a yearly average return of 5.5% and a 66% success rate. McConnell has a average return when recommending QCOM, and is ranked #933 out of 3631 analysts.