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Why One Analyst Says Chipotle’s Earnings Could Surge 350% By 2025

Why One Analyst Says Chipotle’s Earnings Could Surge 350% By 2025

This Stifel analysts says Chipotle could earn $50 per share by 2025, which could propel the stock far higher.

Chipotle Mexican Grill shares (NYSE: CMG) are up more than 8% this week following an upgrade from Stifel. 

Analyst Chris O’Cull boosted his rating on the stock from Hold to Buy in a note out Monday, and raised his price target on the stock to $1,500.

“Chipotle has demonstrated impressive resilience during the pandemic, and we believe the brand should benefit in 2021 from increased consumer mobility and several sales-building initiatives,” O’Cull wrote in a note. “In addition, we believe Chipotle offers some of the most compelling unit growth prospects within the restaurant industry.”

The Stifel analyst expects Chipotle’s continued menu innovation will keep customers coming back to the burrito chain throughout 2021, and O’Cull said he’s confident diners will continue to frequent Chipotle outposts even when a vaccine makes other restaurant options more palatable.

O’Cull also wrote that the company’s digital ordering and delivery is “amplifying Chipotle’s already fast-growing digital user base.”

Chipotle opened its first digital-only restaurant last month as digital sales have soared this year. The company reported that its digital sales more than tripled in the third quarter, and CEO Brain Niccol said total digital orders could exceed $2.5 billion this year, more than double last year’s total.

Moreover, Chipotle’s rewards program has roughly doubled its enrolled membership, and the company said that consumers in this program are more likely to be loyal to the brand. 

With Chipotle on a strong growth path, O’Cull estimates that its goal of 6,000 U.S. restaurants will equate to 5% to 7% annual unit growth. About 70% of the new stores are expected to have drive-through service, which has historically led to higher sales and margins than at its traditional stores.

Chipotle currently trades at more than 60 times forward earnings, which for many analysts is a headwind. But O’Cull believes Chipotle can earn $50 a share by 2025—up from his estimate of $11 for this year—and that massive growth will help the stock continue to climb higher.

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