Nomura Holdings analyst Mark Kalinowski was out with new ratings and price targets on coffee maker Starbucks Corporation (NASDAQ:SBUX), and burrito maker Chipotle Mexican Grill, Inc. (NYSE:CMG). Below are the ratings along with price targets and comments.
In a research report issued yesterday, Nomura’s Mark Kalinowski initiated coverage on shares of Starbucks, with a Buy rating and price target of $70, which implies an upside of 23% from current levels.
Kalinowski wrote, “Positives and opportunities include digital initiatives – notably Mobile Order & Pay – that could help keep Americas’ same-store sales momentum robust, favorable market-share trends, and a beneficial coffee-cost outlook. Risks include the ongoing battle of results versus Street expectations, an eventual leadership transition, and the law of large numbers. Our EPS estimates for fiscal 2016 and fiscal 2017 of $1.90 and $2.19, respectively, are each $0.01 above current sell-side consensus (Consensus Metrix) forecasts.”
“We view Starbucks as the bestpositioned beverage specialist in the restaurant industry, offering the best combination of attractive coffees, coffee-based beverages, and non-coffee drinks – all within an inviting, contemporary atmosphere for those inclined to enter a store,” the analyst concluded.
Out of the 13 analysts polled by TipRanks (in the past 3 months), 10 rate Starbucks stock a Buy, while 3 rate the stock a Hold. With a return potential of 18%, the stock’s consensus target price stands at $67.28
Chipotle Mexican Grill, Inc.
In addition, Kalinowski initiated coverage on shares of Chipotle, with a Neutral rating and price target of $420, which represents a potential downside of 19% from where the stock is currently trading.
Kalinowski opined, “Positives and opportunities include differentiated brand positioning (“the gourmet restaurant where you eat with your hands”), the likelihood of market share gains for years to come, and potential increases in mobile and online ordering. Risks include low visibility into sales recovery, the potential for further food sourcing and safety issues, the ongoing battle of results versus Street expectations, rising labor costs, and valuation. Our EPS estimates for 2016 and 2017 of $7.90 and $14.00, respectively, are $0.43 and $0.53 below current sell-side consensus (Consensus Metrix) forecasts. Our five-year annualized EPS growth projection is 18%.”
“Several months ago, Chipotle’s animal welfare auditors found issues at one of the company’s key pork suppliers […] Although we believe that Chipotle’s approach in this case is sound in terms of its longterm business strategy, it can lead to shorter-term issues. Management estimates that the pork shortage negatively affected same-store sales by as much as 200bp in Q2 and 100bp in the first nine months of 2015. Moreover, the possibility of food-cost increases related to Chipotle’s eagerness to embrace “ingredients with integrity” should be kept in mind by investors,” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Kalinowski has a yearly average return of 10.4% and a 74% success rate. Kalinowski has a 39.6% average return when recommending CMG, and is ranked #235 out of 3640 analysts.