While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Chipotle Mexican Grill (NYSE: CMG ) rallied 3% today after Deutsche Bank upgraded the burrito specialist from market perform to outperform.
So what: Along with the upgrade, analyst Bryan Elliot planted a price target of $560 on the stock, representing about 12% worth of upside to Friday's close. So while momentum traders might be turned off by Chipotle's sharp pullback in recent weeks, Elliot's call could reflect a growing sense on Wall Street that its potential is becoming too cheap to pass up.
Now what: According to Deutsche, Chipotle's risk/reward trade-off is rather attractive at this point. "The stock now trades at 31.4x our 2015 EPS estimate, which we believe is very reasonable considering the company's 1) powerful underlying comp momentum; 2) low-double digit unit growth profile; 3) industry leading margins and unit economics; and 4) debt free balance sheet with a growing cash balance (currently $32.42 per share)," said Elliot. When you couple Chipotle's still-juicy prospects with its recent price decline, it's tough to disagree with Deutsche's upgrade.
Warren Buffett just bought nearly 9 million shares of this company
Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click HERE to discover more about this industry-leading stock and join Buffett in his quest for a veritable landslide of profits!