Citi maintains a "Buy" rating on Chipotle Mexican Grill (CMG), adjusting the price target to $69 from $70, reflecting a 30.0x EV/EBITDA multiple. The report highlights strong underlying demand despite concerns over slowing year-end comps and avocado tariff exposure. Citi attributes these concerns to temporary factors like holiday shifts and weather, rather than a fundamental weakening in demand. The new CEO is expected to maintain the current successful strategy, focusing on sales drivers such as limited-time offers and throughput improvements.
Key areas of focus include updates on throughput enhancements, the expeditor role, and food prep equipment like the produce slicer, which is expected to recoup investment in portion size. Avocado prices remain a challenge, but Citi believes Chipotle can mitigate this through supply chain adjustments and pricing strategies. Footfall data shows a modest y/y increase of 11.3%, with consistent share gains against other fast-casual competitors.
Citi's EPS estimates for 2024 and 2025 remain at $1.12 and $1.33, respectively. The valuation is based on a next-twelve-month EV/EBITDA multiple, justified by Chipotle's above-industry traffic and unit growth outlook. Risks include potential impacts from inflation on consumer spending and store-level margins, as well as challenges in meeting new store growth expectations.
Chipotle was trading at $56.70 as of January 27, 2025.