Chipotle Reports Strong Quarterly Results

Chipotle Mexican Grill, Inc. (Ticker Symbol: CMG) released quarterly earnings that beat the street’s expectations.  The Newport Beach, Calif.-based company reported an earnings per share beat of $3.82 vs. Wall Street analysts’ estimates of $3.22 per share. The Mexican fast food giant reported revenue of $1.4 billion for the quarter that was right in line with what Wall Street was expecting.  Additionally, Chipotle reported an increase in same-store sales growth by 11% vs. Wall Street analysts’ expectations of 9.3% growth.

The company has also been seeing positive sales growth from its digital sales as well as solid additions to its loyalty program.  Digital sales grew a whopping 87.9% and were responsible for a fifth of its total sales for this quarter.  Additionally, since Chipotle first launched its loyalty program in March of this year the company has added over 7 million members.

Chipotle did give some future guidance on its forecast for store openings. The company announced that it will most likely open fewer than the 140-155 new stores that it was planning on in fiscal 2019.  Additionally, the company plans on introducing a “Chipotlane” in half of its new locations in 2020. Chiptole has already been testing some special drive-thrus for its digital order pickups and has seen success so far in over 20 locations.  The company is now planning on putting “Chipotlanes” in roughly half of its restaurants currently under construction.

The above image is a chart of Chiptole’s stock over roughly the past three years.  The stock started off in 2017 positively, but that was short-lived and the stock spent the remainder of the year pulling back, finding support just under the $250.00 price level. Chipotle’s stock then bottomed, forming a bullish divergence pattern, as indicated on the chart by the yellow lines, where the stock makes a lower low in price but the Relative Strength Index makes a higher low. Traders and investors sometimes look at divergences for a possible pause within the current trend which can, at times, lead to a reversal as occurred in Chipoltle’s case.

Chiptole’s stock came to life and broke above its downtrend led by a strong second-quarter earnings release in 2018. The stock stayed in a $100 dollar trading range between the price levels of $400 and $500 for the remainder of the year.  Chiptole had a wonderful start to 2019 led by a string of good earnings and guidance reports.  The stock proceeded to rally over 70%, finding dynamic support at its 100-day moving average and trading to an all-time high of $857.90 on September 9th, 2019.  The stock has pulled back since then and is currently finding price support right at its 200-day moving average.

(Chart above courtesy of ​​)

Based on a survey of 23 analysts offering 12-month price targets, the average price target for Chipotle Mexican Grill’s stock is $834.57. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $757.64.

Investors in Chipotle should look to Chiptole’s next earnings release on February 9th, 2020 for fresh news on the company.


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