Shares of Chipotle Mexican Grill (NYSE:CMG) leapt nearly 23% last month, according to data provided by S&P Global Market Intelligence, after analysts at BTIG released a bullish report on the popular restaurant chain.
BTIG analyst Peter Saleh highlighted several potential growth drivers for Chipotle, including new menu items and digital sales. In this regard, the company recently introduced "Lifestyle Bowls" designed to better serve customers following popular eating plans such as the Paleo and ketogenic diets. These items are exclusively available through Chipotle's mobile app and website, a move that could provide a boost to the chain's digital initiatives.
"Now more than ever, Americans are embracing new and varied approaches to healthy living and wellness," Chipotle chief marketing officer Chris Brand said in a press release. "We've watched guests custom create lifestyle-specific bowls when ordering in our restaurants, so it made sense to offer delicious options via our online channels that help people easily order bowls with real ingredients that fit their wellness goals."
Moreover, Saleh believes that making these bowls available only through online orders will prevent them from slowing Chipotle's in-store ordering lines. The restaurant's plan to use existing ingredients should further reduce risk. "In our view, the benefits of this launch include the potential for increased traffic, menu-mix and digital sales [higher margin], with limited downside if the products don't resonate as they required no additional ingredients," Saleh said.
Additionally, Saleh noted the potential for Chipotle's new rewards program to boost growth. Using Panera Bread as an example, Saleh estimates that Chipotle's rewards strategy could drive a 200-basis-point increase in the chain's transaction growth.
Finally, Saleh believes that Chipotle's improving sales volumes and profit margins could support an acceleration in new restaurant openings beginning in 2020.
Check out the latest Chipotle earnings call transcript.
Investors will be able to see early indications of whether Saleh's predictions are on point when Chipotle reports fourth-quarter financial results after the market closes on Feb. 6. Shareholders may also want to tune in to the company's earnings call that same day or read a transcript of the call, which will be made available here.