Chipotle's (CMG 0.21%) stock is sizzling hotter than steak fajitas in 2021. Its management can be commended for handling the pandemic's onset and duration with skillfulness, adapting quickly to digital sales when in-person dining was forced to shut down. 

And now that economies are reopening, Chipotle is getting the best of both worlds -- maintaining a high degree of digital orders while the on-premise business recovers. The market is rewarding the fast-casual restaurant business by bidding up its stock price to the tune of 47% this year. With Chipotle's stock already near record highs, is there room for it to go any higher?

A burrito on top of a cutting board with salsa and a lime in the background.

  Image source: Getty Images.

Chipotle is raising a critical long-term target 

The coronavirus pandemic had the potential to cripple Chipotle's business, and instead, the company could be in a better position now than before the outbreak. In its most recent quarter, finishing up on June 30, the company said it recovered 70% of its on-premise business while maintaining 80% of digital sales. That's giving the market the impression that Chipotle gained a mass of new customers during the pandemic. Or maybe equally as beneficial, digital orders for pickup or delivery are added occasions where people choose to buy Chipotle.

The development gave management the confidence to raise its long-term adjusted unit volume (AUV) target. AUV is the total sales value Chipotle estimates it generates per store. Chipotle reached the previous target of $2.5 million in the most recent quarter and simultaneously raised it to $3 million. The company has 2,853 stores as of June 30, so $500,000 over that many stores is a substantial increase of annual revenue. Still, the announcement may be premature. After all, it has only been one quarter since economies fully reopened.

However, that wasn't the only piece of good news from Chipotle in the quarter. The markets are concerned about how businesses are dealing with rising prices for commodities and labor. Therefore, investors were pleased when the company instituted price increases, and sales didn't react poorly. Chipotle raised prices on several products from 3.5% to 4%. 

Is Chipotle's stock up too far too fast? 

Chipotle's stock is up 47% year to date and 30% in the last three months. The recent quarter results were excellent, but the positive expectation may have gotten priced into the stock too quickly. After all, it has yet to report quarterly results since raising the long-run AUV target. Moreover, investors still don't know how sales were impacted during the coronavirus surge caused by the delta variant. 

For those reasons, there is a reasonable probability that Chipotle's stock faces resistance going higher, at least until the company reports another quarter of operating results showing progress toward the long-term objectives. Investors looking to start a position in the hot restaurant stock are better served to wait for a pullback in the stock price or to get another quarter's confirmation that the company is sustaining digital sales while recovering the in-person business.