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Chipotle Mexican Grill Inc CMG

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Chipotle Serves Robust Second-Quarter Results Despite Food and Wage Inflation; Shares Look Expensive

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

Wide-moat Chipotle posted strong 2021 second-quarter earnings, with robust comparable store sales, or CSS, growth (18.3% on a two-year stack), new unit openings (6.9% annual growth), and 24.5% restaurant-level margins (its best since 2015) underpinning a modest earnings beat. After digesting management's commentary, particularly considering the incrementality of a return to dine-in traffic, sustained traction of the firm's loyalty program, and 40% incremental operating margins, we anticipate raising our fair value estimate to $1,300, up from $1,200 previously. While Chipotle boasts one of the most compelling growth narratives in our restaurant coverage, market prices continue to look frothy, with shares trading at a 20% premium to our revised fair value estimate at market close, and up further after hours.

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Company Profile

Business Description

Chipotle Mexican Grill is the largest fast-casual chain restaurant in the United States, with systemwide sales approaching $6 billion in 2020. The Mexican concept is entirely company-owned, with a footprint of 2,850 stores heavily indexed to the United States, though the firm maintains a small presence in Canada, the U.K., France, and Germany. Chipotle sells burritos, burrito bowls, tacos, quesadillas, and beverages, with a selling proposition built around competitive prices, high-quality food sourcing, speed of service, and convenience. The company generates its revenue entirely from restaurant sales and delivery fees.

Contact
610 Newport Center Drive, Suite 1300
Newport Beach, CA, 92660
T +1 949 524-4000
Sector Consumer Cyclical
Industry Restaurants
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 88,000

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