Shares of Chipotle Mexican Grill (CMG +4.28%) rose on Friday, following positive remarks from a respected investment bank's research team.
Image source: The Motley Fool.
Chipotle's discounted stock price could be a profit opportunity for investors
Analysts at JPMorgan Chase upgraded Chipotle's stock from neutral to overweight (read: buy). After meeting with CEO Scott Boatwright and chief financial officer Adam Rymer, JPMorgan's team sees the restaurant chain's stock price rising nearly 20% to $35.
NYSE: CMG
Key Data Points
Even after today's gains, Chipotle's shares are down 44% over the past year. With its price-to-earnings (P/E) multiple roughly cut in half during that time, JPMorgan's analysts believe the stock now offers investors a much more attractive risk-to-reward profile and better reflects more subdued growth expectations.
CMG PE Ratio data by YCharts
More moderate, but sustained, growth could drive solid long-term returns
Chipotle's days as a rapidly expanding business are likely over. JPMorgan projects a relatively modest 8% to 9% annual increase in revenue for the fast-casual chain.
Margin expansion will also be harder to come by. The analysts noted that Chipotle is investing more in its employees and technology to improve the customer experience at its restaurants.
Yet JPMorgan's team did highlight a potentially lucrative opportunity for Chipotle to expand internationally, which it argues is not fully reflected in its depressed share price.
