Chipotle Mexican Grill: Food Cost Worries Provides Buying Opportunity, Says Oppenheimer
In a research report published today, Oppenheimer analyst Brian Bittner assigned an Outperform rating on Chipotle Mexican Grill (NYSEARCA:CMG) with a $775 price target, following the company’s third-quarter earnings.
Bittner observed, “3Q handily beat, but investors are anxious that the model’s ’15 bull-case is doomed from transitory food cost pressures. Any stock weakness should be bought, similar to 1Q’s overreaction on food margin worries. Other margin items are showing impressive leverage amidst sales strength that we believe will outperform expectations as tailwinds sustain. Plus, food cost issues are unlikely to get worse from here (probably get better), and if they do, CMG has proven its pricing power which could unload again in ’15.”
The analyst added, “While near-term food cost headwinds penalize expectations for the model, comps remain best in-class and provide a set-up for significant margin upside if food costs normalize. We remain buyers and would use weakness to add to positions.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Brian Bittner has a total average return of 13.7% and a 68.2% success rate. Bittner has a 10.0% average return when recommending CMG, and is ranked #237 out of 3337 analysts.