Yahoo Finance Chipotle sales have been on fire. Here are 3 ways the burrito chain can keep them sizzling.
Chipotle (CMG) has been winning over investors, with shares up nearly 40% year to date against a difficult restaurant landscape as consumers pull back due to higher prices.
One analyst thinks there are more levers the fast-casual restaurant could pull to keep the flame burning long-term.
Chipotle ramping up its operating hours is one lever, wrote Bernstein analyst Danilo Gargiulo, who has an Outperform rating and price target of $80 on the stock, following Wednesday's 50-for-1 stock split.
Both Wall Street and Main Street have long anticipated late-night or breakfast hours from the burrito chain.
Revamping Chipotle's loyalty program could also boost sales. As chains ramp up personalized offerings via rewards, Chipotle could also increase its own loyalty benefits. Though the chain doesn't break out how many reward members it has, digital sales represented 36.5% of total food and beverage revenue in the first quarter.
Chipotle's key audience, Gen Z, presents a crucial runway for the company too, as the demographic increasingly becomes household decision-makers.
Gargiulo wrote that Gen Z has a significant brand affiliation with Chipotle and engages more with the brand than its peers on TikTok, which tends to skew to a younger audience of mostly 18-to-24-year-olds.
Chipotle boasts 55.4 million likes on the social media platform, while CEO Brian Niccol's old stomping grounds, Taco Bell (YUM), trails with 51.7 million likes. Farther behind are McDonald's (MCD), with 30.1 million likes, and Wendy's (WEN), with 20.6 million.
In addition to those three long-term drivers, Gargiulo noted Chipotle's category strength represents yet another tailwind for the company.
Chicken is gaining popularity, as Yahoo Finance previously reported, and the cheaper protein is easier on consumers' tightening wallets, aligns with healthy eating trends, and allows companies more room for innovation. Gargiulo projects the market for chicken will grow by 7% over the next five years at limited-service restaurants.
The market for casual dining in Latin America is growing rapidly too. It grew 8% from 2018 to 2023 and is expected to grow another 6% from 2023 to 2028.
Investors hope the momentum of recent quarters sticks around. In the first quarter, Chipotle blew past revenue, earnings, and same-store sales expectations yet again.
Post-stock split, shares of Chipotle are still trading at a higher price than when the company went public in 2006 at $22 per share. The stock hovered around $62 per share as of Thursday's market close.
In a note to clients, TD Cowen analyst Andrew Charles wrote that the firm believes Chipotle is "well positioned to deliver mid-single digit same-store sales annually over the medium term," driven by its omnichannel approach, Chipotlane drive-through innovation, and consumers' interest in ingredient transparency. Charles now has a price target of $72 on the stock.
Typically, stock splits are bullish for companies that conduct them. As Yahoo Finance's Seana Smith reported following Nvidia's (NVDA) 10-for-1 stock split earlier this month, stock splits tend to see an average return one year later of 25% versus about 12% for the broader market, according to analysis from Bank of America.
Year to date, Chipotle shares are up 38%, outpacing the S&P 500's (^GSPC) 15% gain.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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