Shares of Chipotle Mexican Grill (CMG 0.94%) are trading up close to 3% today after an analyst at Piper Sandler gave the burrito and taco quick-service restaurant a ringing endorsement, setting her price target for its stock at $1,100. The stock's all-time high was $966, achieved in early 2020 before the COVID-19 pandemic reached America's shores.
Analyst Nicole Miller Regan at Piper Sandler raised her price target in a $250 hike from her previous estimate of $850. Her research note cited Chipotle's $900 million in cash as one expected source of strength, before enlarging on how its management "is operating from a more proactive position and showing flexibility around changing consumer behavior."
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Her analysis went on to describe how Chipotle has switched over to a 70% digital sales model, and stated "Fundamentally the company has the ability to pivot and the financial resources required to carry out its long-term growth strategy."
Before the novel coronavirus arrived, the fast-food chain was posting comparable sales gains higher than 12% year over year. Even after the coronavirus arrived in the USA, Chipotle managed to adapt quickly to new models of doing business and saw sales starting to recover somewhat as early as the second half of April. The fact that the company is debt-free also helps it with its survival and recovery efforts.
Lending more weight to analyst optimism, Chipotle closed just 4% of its restaurants, keeping most locations open for takeout. The company may also use its cash for both new restaurant openings and remodeling projects designed to increase its average unit volume, or AUV, including the opening of many more digitally integrated drive-through "Chipotlanes."
