1 Wall Street analysts believe this top stock could rise by 30%. This is why I’m not sure it’s a purchase now
Research analysts set the tone of how the investment community views a particular business. Positive reports can instill confidence that can lead to positive emotions.
There is one top stock that has risen 225% over the past five years. However, one Sellside Analyst We believe there is a possibility of a 30% rise. That may sound promising, encourage you to want to scoop the stock.
But this is why I’m not sure this company is shopping now.
Christopher Khalil RBC The capital market price target is $75 Chipotle Mexican Grill (NYSE: CMG)suggesting a 30% upside from the $57.51 price on February 5th. He believes Tex-Mex’s first casual chain will benefit from the ongoing catalyst. There’s nothing really new in the story.
Chipotle has developed a very successful model. Same store sales (SSS) Growth. This metric has risen for the seventh year in a row.
The higher SSS is partially driven by more pedestrians. Pricing is another important factor. Management has been able to raise menu prices on multiple occasions over the past few years, but has not had a negative impact on revenue growth.
Despite economic uncertainty, the business was able to thrive. This highlights the value proposition that customers find when choosing a meal at restaurant chains. The prospect of improving the macro environment in the near future will likely improve Chipotle’s already impressive financial performance.
It is also difficult to deny Chipotle’s financial strength. This is another area that gives the confidence of RBC Khalil. Chipotle’s operating margin was a great 16.9% last year. This is expanding from 7.9% five years ago in 2019. Here we have proven sales leverage as Chipotle can expand and generate better profitability.
We cannot forget the company’s growth trajectory. Chipotle plans to open 315-345 new stores in 2025, totaling over 4,000. The pace of new openings has actually been accelerating in recent years. This is a clear indication of undeveloped demand that the leadership team is seeing.
But in the long run, Chipotle believes that with increasing annual unit volume and strong store-level profitability, it will reach 7,000 locations in the US.
Seeing Chipotle stocks rise 30% over the next 12 months, it is based on momentum working in that favor, particularly on positive catalysts and momentum. Furthermore, stocks have performed much better year by year in recent past.