Shares of Chipotle Mexican Grill (NYSE:CMG) gained 3.79% in Thursday’s after-hours trading as the company exceeded analysts’ earnings expectations for Q3 2023. The restaurant operator’s solid earnings beat reflects higher sales and margin improvement. Following better-than-expected Q3 earnings, several analysts maintained their bullish stance on CMG stock and continued to recommend a Buy.
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Wells Fargo analyst Zachary Fadem reiterated a Buy rating on CMG stock with a price target of $2,200. Fadem expects the Street’s estimates for Chipotle “to grind higher.” The analyst expects higher pricing and unit growth to support its financials in 2024.
Echoing similar sentiments, Chris O`Cull of Stifel Nicolaus maintained a Buy on CMG stock with a price target of $2,100. The analyst expects Chipotle to gain from higher comparable restaurant sales and new restaurant openings. O`Cull believes that CMG can “generate low-to-mid-teens revenue growth, resulting in margin leverage and roughly 18-20% long-term EPS growth.”
Along with Fadem and O`Cull, TD Cowen analyst Andrew Charles also reiterated a Buy on Chipotle stock. The analyst has a price target of $2,200. With this background, let’s delve into Chipotle’s Q3 performance.
Q3 Earnings Handily Surpassed Estimate
Chipotle delivered adjusted earnings of $11.36 per share in Q3 compared to $9.51 in the prior-year quarter. Moreover, its EPS came significantly higher than the Street’s estimate of $10.55. An increase in total revenue and margin expansion drove the company’s bottom line in the third quarter.
Chipotle delivered total revenue of $2.47 billion, which came in line with the Street’s forecast and increased 11.3% year-over-year. The improvement in its top line reflects benefits from new restaurant openings and a 5% increase in comparable restaurant sales led by higher transactions and an uptick in average check size.
Thanks to the higher sales, Chipotle’s operating margin came in at 16%, up from 15.1% in the prior-year quarter. Looking ahead, Chipotle maintained its full-year projection for comparable restaurant sales, anticipating a mid-to-high-single-digit growth rate. Additionally, the company intends to open 255 to 285 new restaurants in 2023.
In light of these developments, let’s look at what the Street recommends for CMG stock.
Is Chipotle a Good Long-Term Stock?
Chipotle’s ability to increase menu prices and new restaurant openings position it well to deliver solid financials in the long term. This is reflected in analysts’ bullish outlook about CMG stock.
With 12 Buy and two Hold recommendations, Chipotle stock has a Strong Buy consensus rating. Chipotle stock has gained over 30% year-to-date. Meanwhile, the average CMG stock price target of $2,173.57 implies a further upside potential of 20.32% from current levels.
