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Chipotle Mexican Grill Inc CMG

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Morningstar’s Analysis

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Investors Should Sate Their Appetite Elsewhere For Now; Chipotle Shares Don't Look Appetizing

Sean Dunlop Equity Analyst

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.

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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 of $7.2 billion over the last twelve months. The Mexican concept is entirely company-owned, with a footprint of nearly 2,900 stores at the end of the third quarter of 2021 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.

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