Chipotle (GCM) has wowed investors, with shares up nearly 40% year-to-date versus a challenging restaurant landscape as consumers pull out due to higher prices.
One analyst thinks the fast-casual restaurant could pull other levers to keep the flame burning in the long term.
Chipotle’s increased hours are a lever, wrote Bernstein analyst Danilo Gargiulo, who has an outperform rating and an $80 price target on the stock, after Wednesday’s release. 50 to 1 stock split.
Wall Street and Main Street have long awaited the burrito chain’s late-night or breakfast hours.
Chipotle’s loyalty program overhaul could also boost sales. As chains increase personalized offers through rewards, Chipotle could also increase its own loyalty benefits. While the chain doesn’t say how many members are rewarded, digital sales accounted for 36.5% of total food and beverage revenue in the first quarter.
Chipotle’s key audience, Generation Z, also presents a crucial avenue for the company as this demographic increasingly becomes decision-makers within households.
Gargiulo wrote that Gen Z has a significant brand affiliation with Chipotle and engages more with the brand than their peers on TikTok, which tends to cater to a younger audience. mainly 18-24 year olds.
Chipotle has 55.4 million likes on the social media platform, while CEO Brian Niccol’s former stomping grounds Taco Bell (YUM), trails with 51.7 million likes. Further behind are McDonald’s (MCD), with 30.1 million likes, and Wendy’s (MAGNIFYING GLASS), with 20.6 million.
In addition to these three long-term drivers, Gargiulo noted that Chipotle’s strength in the category represents yet another tailwind for the company.
Chicken Gains Popularity, Like Yahoo Finance Previously reported, and cheaper proteins are easier on consumers’ tight wallets, align with healthy eating trends and give companies more room to innovate. Gargiulo predicts the chicken market will grow 7% over the next five years in limited-service restaurants.
The casual dining market in Latin America is also growing rapidly, growing by 8% between 2018 and 2023 and is expected to grow by another 6% between 2023 and 2028.
Investors hope that the momentum of recent quarters will continue. In the first trimester, Chipotle beats expectations for revenue, profit and same-store sales Again.
After the stock split, Chipotle shares are still trading at a higher price than when the company went public in 2006, at $22 per share. The stock was hovering around $62 per share at the close of trading Thursday.
In a note to clients, TD Cowen analyst Andrew Charles wrote that the company believes Chipotle is “well positioned to achieve mid-single-digit annual same-store sales over the medium term,” thanks to its omnichannel approach, Chipotlane’s drive-thru innovation and consumer interest in ingredient transparency. Charles now has a $72 price target on the stock.
Typically, stock splits are bullish for the companies that do them. As Yahoo Finance Seana Smith reported following Nvidia (NVDA) 10-for-1 stock split earlier this month, stock splits tend to generate an average return a year later of 25% versus about 12% for the broader market, according to a Bank of America analysis.
Chipotle shares have risen 38% year-to-date, outperforming the S&P 500 (^GSPC) 15% gain.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email him at bdipalma@yahoofinance.com.
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