Shares of Chipotle Mexican Grill (NYSE:CMG), the largest U.S. fast-casual Mexican restaurant chain, jumped more than 5% higher early Monday as the company received a vote of confidence from Wedbush Securities analyst Nick Setyan.
Setyan said channel checks indicated Chipotle's same-store sales were better than expected and that stores operating at 50% capacity were up by high single-digits or low double-digits. Chipotle has also recorded strong off-premise sales trends during the COVID-19 pandemic. Because of those factors, the Wedbush team raised second-quarter same-store sales estimates to a 9% decline, better than the previous 20% decline, and Setyan believes it's possible sales comps could turn positive as soon as the third quarter.
"We believe a premium is justifiable given our expectation of accelerated growth post-COVID as CMG's market share gains accelerate," Setyan noted. Wedbush reaffirms its outperform rating on Chipotle and also boosted its price target to $1,200 per share from $870. While the economic recovery, and the speed at which restaurant traffic will rebound, is uncertain, Chipotle investors can rest well knowing the company has the scale to remain price competitive -- an important aspect during economic slowdowns. The fast-casual restaurant should be well positioned to take market share with its price competitiveness and stronger off-premise sales as the economy gradually improves.