ADVERTISEMENT

CREDIT SUISSE: Chipotle is beginning the long road to recovery (CMG)

Chipotle just reported it's best quarterly numbers since the 2015 E. coli outbreak cut the company's stock price in half. The stock is responding.

Chipotle just reported it's best quarterly numbers since the 2015 E. coli outbreak cut the company's stock price in half. The stock is responding, rising 4.86% as of 10:20 AM ET.

ADVERTISEMENT

Credit Suisse analyst Jason West sent a note to clients April 26 raising his price target on the stock to $425 from $375. He reminded investors that the turnaround process is just beginning, and that there is a long and onerous road ahead.

"The pace of recovery should moderate from here as CMG begins to lap more normalized sales and expense trend," West said. "We also continue to believe the cost of customer recapture will be higher than expected, particularly amidst a very tight labor market and increasing competition."

West came to his $425 price target by valuing Chipotle based on "~20x 2018E EV/EBITDA". He gave the stock a higher multiple than the 15X industry average because of Chipotle's 8-9% new restaurant sales growth.

ADVERTISEMENT

"We believe this pace of recovery is fully embedded in the stock at this price", West said.

In the company's earnings call, Chipotle did report a "payment systems breach," which tempered gains for the stock after the close April 25. Chipotle has not released many details about the breach but Credit Suisse said "this issue could cause a moderate pullback in near-term sales trends."

FOLLOW BUSINESS INSIDER AFRICA

Unblock notifications in browser settings.
ADVERTISEMENT

Recommended articles

Africa's first black billionaire could join $2.9 billion Vivendi bid for MultiChoice

Africa's first black billionaire could join $2.9 billion Vivendi bid for MultiChoice

10 most dangerous African countries in 2024

10 most dangerous African countries in 2024

Russia’s nuclear influence expands further north of Africa

Russia’s nuclear influence expands further north of Africa

Navigating the future: How AI transforms selling on Amazon

Navigating the future: How AI transforms selling on Amazon

Wall decor tips: Transforming your space with style and creativity

Wall decor tips: Transforming your space with style and creativity

Putin's African diplomacy: Security talks with West, Central Africa take centre stage

Putin's African diplomacy: Security talks with West, Central Africa take centre stage

Infinix users get over 35% exclusive discount on Showmax premier league & general entertainment subscription

Infinix users get over 35% exclusive discount on Showmax premier league & general entertainment subscription

10 longest bridges in Africa

10 longest bridges in Africa

India issues free heart surgeries to 150 Ugandan children

India issues free heart surgeries to 150 Ugandan children

ADVERTISEMENT