Analyst Note| Sean Dunlop |
Wide-moat Chipotle reported strong third-quarter earnings, with revenue ($2 billion) and adjusted earnings per share ($7.02) outpacing our $1.9 billion and $6.34 forecasts. The firm generated impressive comparable store sales growth, with a return of in-restaurant traffic (to 80% of pre-COVID-19 levels) and the retention of digital sales volumes (still 43% of the sales mix) driving 15.1% comps and 21.9% revenue growth from the year-ago period. We're encouraged by the incrementality of the digital business, allowing $3 and $3.5 million average unit volumes to be reached in 2024 and 2028, in our view. Nevertheless, we maintain our fair value estimate of $1,300 per share, as we balance time value of money with near-term margin headwinds, and view shares as overvalued.