Chipotle (CMG) Shares Hits $1,000: Should I Buy The Stock Now?

By Amit Chowdhry ● May 19, 2020
  • Chipotle Mexican Grill, Inc. (NYSE: CMG) has passed the $1,000 mark. Should you buy the stock now? Here is some info to help you decide.

On Monday, shares of Chipotle Mexican Grill, Inc. (NYSE: CMG) hit $1,000 for the first time and today it is climbing even higher.

The reason for Chipotle’s jump in the share price is largely due to the growth of its delivery business as the coronavirus pandemic caused restaurants around the world to be shut down.

About a year ago, Chipotle was trading at $718 and it dropped down to $465.21 on March 18. But in the past month, Chipotle’s shares surged over 25%

Chipotle had announced its first-quarter earnings on April 21. And investors have been bullish about Chipotle’s ability to pivot towards digital sales and lean more on deliveries. For the first quarter, Chipotle’s digital sales jumped 81% and it represented 26.3% of total sales.

“As people started to implement social distancing, we moved swiftly by driving further investments towards digital and delivery designed to reduce friction while increasing convenient access. Although Queso Blanco is off to a terrific start, we reprioritized our marketing efforts by offering free delivery,” said Chipotle chief executive officer Brian Niccol during the earnings report. “We believe this will have a lasting benefit well beyond the current crisis and are pleased to report that we have maintained strong momentum into April.”

Chipotle’s national delivery partnership with Uber Eats has also been successful as it helped drive new customers and a greater frequency.

The loyalty program has also surged as daily sign-ups nearly quadrupled. And now Chipotle has 11.5 million members participating in the loyalty program.

Should You Buy Chipotle Mexican Grill, Inc. (NYSE: CMG) Now?

Based on the reports I have been reading, 47% of analysts are saying buy, 50% of analysts are saying hold, and 3% are saying sell.

Case From The Bulls:

The bulls are saying that it will take time to refine Niccol’s “path to performance,” but the plan to enhance brand visibility, second make lines for delivery and mobile orders, and food waste reduction is solid. And Chipotle’s food safety issues and naturally raised proteins resonate with consumer preferences. Plus the decision to accelerate the “Chipotlane” pickup window could boost longer-term revenue.

Case From The Bears:

The bears are saying that the competition in the fast-casual restaurant market is intensifying and switching costs do not exist. And due to fewer suppliers of naturally raised proteins, food shortages and unpredictable pricing could become an issue.

Disclosure: I own a small number of Chipotle Mexican Grill, Inc. (NYSE: CMG) shares. I wrote this article myself and I do not have any business relationship with any company whose stock I write about. I am not a financial advisor and all articles are my opinion. You should do your own due diligence and consider talking to a financial professional before investing.