Shares of Chipotle Mexican Grill (NYSE:CMG) rose 14.3% in May, according to data provided by S&P Global Market Intelligence. While the company didn't report any important news during the month to explain the stock's upward move, it closed April by reporting encouraging results for the first quarter of 2020 despite COVID-19.
And don't look now, but Chipotle stock has more than doubled from March lows, easily outpacing the broad market rebound, and even passing $1,000 per share for the first time.
Chipotle didn't close many restaurants because of the coronavirus, only dining rooms. By staying open for business, the company generated Q1 revenue with delivery and takeout. In March, monthly comparable-restaurant sales only fell 16% year over year, pretty remarkable for a restaurant chain with no open dining rooms. At one point, comps were down as much as 35%, but management noted an improvement by April.
All told, Chipotle was still profitable in Q1. And, coupled with its pristine balance sheet, the company is in an enviable position. It can calmly execute on its long-term vision rather than frenetically scramble to stay solvent.
These strengths haven't gone unnoticed. In May, a Piper Sandler analyst raised Chipotle's price target to $1,100 per share. Not to be outdone, a Wedbush analyst subsequently raised Chipotle's price target to $1,200. When prominent analysts issue these buy ratings, Wall Street listens, even if only temporarily. Accordingly, Chipotle stock popped both times on the news.
While I'll stop short of issuing my own price target or time frame, I largely agree with the premise of these analysts' opinions. It may sound crazy to invest in a restaurant stock right now, but Chipotle has long been a top growth stock. It generates tons of cash, and still has more years of growth ahead. And that's why I think it's set up to beat the market long term.