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The recent pullback in shares of Chipotle may be nearing its end, according to Piper Sandler. The firm upgraded the stock to overweight from neutral but cut its price target by $3 to $50, which implies 20.1% upside from Monday’s close. In late July, shares tumbled more than 13% after the burrito chain slashed its same-store sales outlook for 2025, the second quarter in a row that it’s done this. The company also reported that traffic fell for the second straight quarter. The stock’s year-to-date decline now sits at about 31%, which analyst Brian Mullan said prices in a scenario in which the company’s growth momentum doesn’t ramp up. “While the debate that investors are having is definitely around the idea of whether or not CMG is still a consistent [plus mid-single-digits percentage] [same-store sales] business, we think the market itself has already priced in an outcome where it doesn’t get there next year,” the analyst wrote in a recent note. “Tactically, we do see and respect the risk to the top-line in the back half of this year; and in fact, our in-print estimates are already below consensus,” Mullan also wrote. “While this is not a good thing per se, and there is a magnitude of misses that would render us more concerned; at present we think a lot of the bad has already been priced in with shares down ~31% YTD.” CMG YTD mountain CMG, year-to-date Mullan also said that it might be difficult for Chipotle to remain a business with mid-single-digit same-store sales growth while it looks to expand its restaurant level margins by several hundred basis points. That said, he sees its risk-reward profile as favorable because “we can get to ~20% upside in a Base Case that revolves around comping +3.0% for the next two years.” “CMG might be able to accomplish one of those goals, but not both; on a sustainable basis,” the analyst continued. “From our perspective, the good news is that CMG does not need to accomplish both in order for the shares to see attractive upside from here.” The stock was about 1% in premarket trading Tuesday on the heels of the upgrade. Analysts polled by LSEG are mostly bullish on the stock. Of the 36 who cover it, 26 rate it a by or strong buy. The remaining 10 have a hold-equivalent rating.
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