Chipotle Mexican Grill Inc. said its loyalty program, which launched on March 12, has 3 million members, driving 100% growth in digital sales.
Chipotle CMG, -0.19% shares have soared over the past year, up more than 95%, though the stock slumped 4.5% in Thursday trading.
The fast-casual Mexican chain reported 9.9% same-store sales growth in the first quarter with 5.8% transaction growth.
KeyBanc Capital Markets called the digital growth “unprecedented.”
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“We have long viewed Chipotle’s digital capabilities and second-make line as underappreciated assets,” wrote Eric Gonzalez in the KeyBanc note. “However, based on 1Q results, this perception may no longer be valid.”
“Additionally, we are bullish on the company’s loyalty program.”
KeyBanc rates Chipotle shares overweight and raised its price target to $780 from $625.
“In our view, the acceleration in transaction growth from 2% in 4Q18 suggests the company’s digital and marketing efforts are resonating with new and lapsed guests,” wrote BTIG analysts.
Analysts there rate Chipotle stock buy with a $790 price target.
“In our view, this intense focus on improving digital access has been a core pillar of the brands’ success,” the note said. “We expect digital sales mix to continue to improve for the foreseeable future as the company increases the number of locations with a digitized second-make line, adoption of loyalty grows and delivery expands.”
Bernstein analysts highlight the singular nature of this phase of Chipotle’s long turnaround.
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“Chipotle is the rare restaurant to see delivery drive an inflection in comps, reflecting unique characteristics of the concept and strong execution,” analysts led by Sara Senatore wrote. “Loyalty has tended to have a more visible impact at other concepts, implying Chipotle could see further acceleration with its loyalty launch.”
Even the bit of lingering bad news from the infamous illness outbreaks isn’t really so bad, analysts say. Chipotle was subpoenaed about food-safety matters on January 28 and twice after, the company said in its 10-Q filing, all related to reported incidents over the past couple of years.
The company says it has cooperated with the investigation and will continue to do so, but doesn’t know what penalties, if any, it will incur.
“In our view this subpoena is not entirely unexpected given that each subsequent food safety related incident – including the 2017 norovirus outbreak in Sterling VA – has resulted in Chipotle being similarly served and does not constitute new news,” Bernstein wrote in a separate note.
Bernstein rates Chipotle stock outperform with an $820 target price.
Wedbush analysts are bullish about Chipotle going into next year.
“[We] see no risk to margin expectations through 2020,” analysts led by Nick Setyan wrote. “We continue to expect the growth in digital and the combination of in-app and third-party orders to potentially result in >20% incremental margins through 2019.”
Wedbush has a neutral stock rating for Chipotle, with a $700 price target, up from $680.
Chipotle shares have rocketed 57% for the year so far while the S&P 500 index SPX, +0.47% has gained 16.7% for the period.
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