Shares of fast-casual restaurant chain Chipotle Mexican Grill (CMG 2.41%) have surged more than 50% in the past six months, and analysts at Bernstein Research say the run isn't over. Bernstein reiterated its outperform rating on the stock early Tuesday morning while boosting its share price target from $2,800 to $3,200. The new price target represents an upside over the next 12 months or so of about 10%.
Momentum is building for Chipotle
The Bernstein analysts expect 2024 to be a strong year for Chipotle, boosting their prediction of same-store sales growth to 7%. In the longer term, the analysts see Chipotle topping average sales per restaurant of $4 million within five or six years.
Bernstein's optimism certainly meshes with Chipotle's recent results. The company reported same-store sales growth of 8.4% in the fourth quarter, with total revenue jumping 15.4% year over year thanks to new store openings. Operating margin, both at the restaurant level and companywide, improved meaningfully from the prior-year period.
Average sales per restaurant reached $3 million in 2023, and Chipotle has a $4 million average in its crosshairs. The company also expects to more than double its restaurant count in North America in the long run to 7,000. Outside of North America, Chipotle formed its first international partnership last year to accelerate its global expansion.
Chipotle stock is a pricey proposition
While Chipotle's growth story is firing on all cylinders, investors should recognize that much of this growth is already baked into the share price, as evidenced by its sky-high valuation. Based on the average analyst earnings estimate for 2024, Chipotle stock trades at a price-to-earnings ratio of about 54. If the stock rises to match Bernstein's price target, that valuation ratio would shoot up near 60.
While paying such a high price for Chipotle stock might make sense for some investors, the lofty valuation introduces some risk.
