RBC Capital analysts are out today with commentary and analysis on Mexican fast food giant Chipotle Mexican Grill, Inc. (NYSE:CMG) and E-commerce giant Amazon.com, Inc. (NASDAQ:AMZN). The analysts believe that Chipotle offers an attractive long-term growth opportunity, while Amazon reached inflection points.
Chipotle Mexican Grill, Inc.
RBC Capital analyst David Palmer reiterated an Outperform rating on shares of Chipotle, with a price target of $550, while lowering his estimates to reflect recent supply chain costs. The analyst believes that marketing efforts will rebuild trust and ultimately boost traffic over time.
Palmer wrote, “We are lowering our 2016 and 2017 EPS estimates from $13.41 and $18.66 to $12.85 (-13% YOY) and $17.21 (+34 YOY) to reflect supply chain costs, which are expected to unfavorably impact gross margins by 100–200bps on an ongoing basis. We are lowering our 4Q EPS estimate from $2.01 to $1.81 to account for an incremental $8M ($14–16M total; $0.15 EPS impact) in non-recurring expenses associated with food waste, lab analysis, marketing, and advisory services, which are mostly accounted for at the restaurant level.”
The analyst continued, “Our estimates imply that Chipotle’s ongoing sales declines, food safety investments, and traffic initiatives will result in trough earnings this year. It was heartening to hear that Chipotle’s scores on certain brand attributes are back to pre-crisis levels. We are optimistic that margins can begin to recover in 2017, particularly if steak costs begin to decline (as we expect). Chipotle’s restaurant-level economics remain best-in-class despite recent brand damage. Digital ordering remains a significant future opportunity and the company seems to be testing ways to revamp its second make line.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst David Palmer has a yearly average return of 9.4% and a 66% success rate. Palmer has a -11.9% average return when recommending CMG, and is ranked #202 out of 3607 analysts.
Out of the 30 analysts polled by TipRanks, 12 rate Chipotle stock a Buy, 16 rate the stock a Hold and 2 recommend to Sell. With a return potential of 21%, the stock’s consensus target price stands at $550.91.
RBC Capital analyst Mark Mahaney reiterated an Outperform rating on shares of Amazon, with a price target of $775, which represents a potential upside of 31% from where the stock is currently trading.
Mahaney wrote, “We believe AMZN has reached inflection points in both of its segments: Retail, due to Prime Flywheels, & AWS, due to product/pricing initiatives & scale. We also believe AMZN has reached an inflection point as a company– ’16 is lining up to be the year that AWS profitability starts to surpass Retail. We believe the market under-appreciates AMZN’s very high level of execution & the early-stage adoption of its 2 end markets– Retail & Cloud. We view each as ~10% penetrated, creating substantial secular growth for AMZN.”
According to TipRanks.com, analyst Mark Mahaney has a yearly average return of 19.3% and a 59% success rate. Mahaney has a 36.3% average return when recommending AMZN, and is ranked #8 out of 3607 analysts.
Out of the 45 analysts polled by TipRanks, 38 rate Amazon stock a Buy, while 7 rate the stock a Hold. With a return potential of 16%, the stock’s consensus target price stands at $690.40.