Chipotle’s Path to $1,100 a Share
Photo Credit: Chipotle
Chipotle’s stock has more than doubled since it hit a 52-week low of $415 a share in March, and Piper Sandler believes there is still 20% upside potential in the next year.
$1,100 price target: Piper Sandler analyst Nicole Miller Regan lifted her price target to $1,100 from $850 on Wednesday night and reiterated that the burrito chain remains the firm’s top investment recommendation.
Digital strength: Convenience is at the core of Chipotle’s value proposition and digital sales are serving as a key avenue of growth. In the first quarter of 2020, digital sales grew 81% year-over-year and jumped to 26% of total sales, compared to 20% of total sales in the preceding quarter. Delivery is an increasingly important component of Chipotle’s digital strategy. Miller Regan points out that prior to COVID-19, delivery made up 40% of the digital sales mix, while order ahead and catering accounted for 50% and 10%, respectively.
Uber Eats partnership: Chipotle and Uber today announced a delivery partnership in Canada, allowing consumers in the country to order through the Uber Eats app for the first time. This follows a similar partnership in the U.S. between the two companies that was formed in April.
Loyalty program: Chipotle is taking a page out of Starbucks’ playbook. The Mexican food chain’s rewards program now has nearly 12 million members after launching in March of 2019. Piper Sandler says the rewards program in its current form is generating awareness and access, but believes the other key element is great access to data analytics. Miller Regan says Chipotle can “scale up the user database to 100 million through tools such as data mining and cohort mirroring, going forward.”
Store Expansion: Piper Sandler emphasizes new unit openings as a competitive advantage for Chipotle. With $900 million in cash on hand and an undrawn $600 million line of credit, the research firm sees Chipotle “uniquely positioned to gain access to an increased number (and quality) of potential sites.” Piper Sandler estimates gross openings to grow 5.7% in 2020, and 6% in 2021.
