Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking one high-profile Wall Street pick and putting it under the microscope...

Barely one year ago, Chipotle Mexican Grill (NYSE:CMG) stock was on the ropes.

Repeated health scares over E. coli outbreaks at its restaurants had driven shares from a high near $750 to a low closer to $250 -- a 66% loss -- in the space of less than three years. But here's the good news:

Chipotle stock is back!

Q2 same-store sales growth of 10% -- following on the heels of 9.9% comps growth in Q1 -- lifted Chipotle shares to a new high of $780 by the close of trading last week, and today, two of Wall Street's highest-profile analysts are predicting the stock could go higher still.

Here's what you need to know.

Burrito cut in half amid pile of garnish and tomatoes

Image source: Getty Images.

Goldman Sachs initiates

Jumping back into Chipotle stock with both feet this morning, investment banker Goldman Sachs initiated coverage with a price target of $1,000 and its top-most rating of "conviction buy."

"With food safety concerns behind them and new tools to prevent issues in the future (e.g. working with the supply chain and tying employee bonuses to food safety protocols, among others)," argues Goldman in a note covered on StreetInsider.com, "we believe [Chipotle] management will now be able to shift focus toward innovation and reinvigorating what our proprietary consumer survey suggests may be outdated stores."

Consumer spending at the low end of restaurant spending (fast food and fast casual) looks "very strong," says the analyst, and there's a robust opportunity for domestic expansion -- which Chipotle is taking advantage of.  

The company is refranchising restaurants, points out TheFly.com, and food delivery services are driving bigger sales and more traffic to the chain. Digital (i.e., online) sales in particular are surging.

Citigroup concurs

Indeed, as fellow investment banker Citigroup points out in a note of its own this morning, "digital sales" at Chipotle "increased +99% in the quarter and now represent ~18% of sales" for the burrito chain. Arguably more importantly, Citi notes that these "digital sales are also margin accretive to Chipotle" (i.e., the company earns higher profit margins for taking orders online than it does from orders taken in-store).

Moreover, the high-margin digital sales that helped push same-store sales growth up in Q2 aren't petering out. Chipotle raised its guidance for growth for the rest of 2019 as well, reassuring investors that sales will continue to grow strongly.  

Long story short, while Citi acknowledges that Chipotle faces "tougher SSS compares in the next few quarters," the analyst remains convinced that "there are still levers management can pull to successfully maintain momentum, and we're encouraged by today's results."

Nearly as optimistic as Goldman about the stock, Citi gives Chipotle a $955 price target.

Rational or irrational exuberance?

And for good reason. Two straight quarters of 10%-ish same-store sales growth are just the beginning of the good news at Chipotle. On the back of this SSS growth, total revenue jumped 13% in Q2, and quarterly earnings growth was 94%. What's not to like about that?!

Well, actually, there is one thing not to like about Chipotle, and it's the stock's price.

Presently valued at $22.3 billion with $2 billion in net debt on its balance sheet, Chipotle stock currently costs a whopping 97.5 times its $249 million in trailing earnings (and a nearly as pricey 74.5 times trailing free cash flow).

Granted, if Chipotle is able to continue growing profits at 94% per year, year in and year out, the company would quickly grow into its valuation. In fact, though, even analysts optimistic about Chipotle's prospects today don't see it growing earnings much faster than 28% annualized over the next five years -- and the consensus number is only 18.5%, according to S&P Global Market Intelligence.

While respectable numbers, neither 28% nor 18.5% is a fast enough growth rate to justify a P/E valuation rapidly approaching triple digits, in my opinion. This is why, no matter how many analysts come forward with price targets of $955, $1,000, or more for Chipotle, I just can't bring myself to recommend the stock -- even at today's share price of "only" $805.