For a company that came within a handful of dollars of trading beneath $400 a share, it must be a nice feeling to be ending the same year above $1,400 a share. It’s a performance you might expect from some flash Silicon Valley unicorn, but we’re talking about the good old king of burritos here, Chipotle (NYSE: CMG)
As a company that was caught on the front line of the COVID pandemic and had to shut many of its locations overnight back in Q1, shares understandably became fairly unattractive in February and March. But the performance seen in them since April tells you all you need to know about this $40 billion casual food powerhouse and the momentum it’s taking with it into 2021.
The stock had popped nearly 300% in the two years prior to this year’s selloff and was in blue sky territory just before the sell orders started to flood in. But as the worst failed to come to pass and the economic recovery was seen to pick up steam, Wall Street wasn’t slow about buying back in. It was a similar story with the likes of McDonalds (NYSE: MCD) and Wendy’s (NASDAQ: WEN).
Investors quickly realized that low-cost (and high margin) fast food was probably going to be the last in line of expense cuts from the average American who, pandemic or no pandemic, was still going to have to eat. Also, key to the recovery story was the digital channel, which allowed customers to order online and simply collect their food from the store.
By May, Chipotle shares were back at all-time highs as fresh as their guacamole, and they haven’t looked back since. Now as we round the final corner in 2020 and COVID vaccines start to be rolled out, 2021 is looking brighter than ever before. For those of us on the sidelines and thinking about getting involved, there are worse times to pick up some shares.
Only yesterday, Stifel was out with an upgrade to Chipotle shares and said the company had one of the hottest growth stories around right now. In a note to clients, analyst Chris O'Cull added; "Chipotle has demonstrated impressive resilience during the pandemic, and we believe the brand should benefit in 2021 from increased consumer mobility and several sales-building initiatives." O’Cull also upped his price target on the stock to $1,500.
The bullish move follows Cowen who earlier this month put Chipotle on their 2021 best ideas list. Analyst Andrew Charles is particularly bullish on the company’s digital channel and points out how “that's not going away even if the pandemic does, as consumers are going to continue to prefer frictionless and convenient digital-ordering." Charles goes one further than Stifel with a price target of $1,550.
But both of those still lag behind Piper Sandler, who halfway through November slapped a price target of $1,745 onto the stock. It was around the same time as the news on the COVID vaccines was hitting headlines and so fresh fuel was added to the rally. They said at the time "we believe the company’s infrastructure is well-positioned to scale in 2020 and beyond while also positioning the company to effectively utilize the increasing amount of transaction data it is collecting.”
All good stuff for the potential investor to be hearing and there’s a strong case for a buy here. If they can come through a pandemic stronger than ever, what will they be able to accomplish when things are back near the old normal?
Chipotle Mexican Grill is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
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