Chipotle Mexican Grill (NYSE: CMG) stock price has done well in the past few years, making it one of the best-performing companies in the industry. It has soared by more than 56% in the past 12 months and by 335% in five years. This surge has helped to push its market cap to over $94 billion.
Chipotle’s growth has been spectacular
Chipotle’s growth has happened as the company’s CEO Brian Niccol implemented one of the best turnarounds in corporate America. In his tenure, the number of stores jumped from over 2,400 in 2017 to over 3,400. He has also successfully implemented takeaway shopping.
At the same time, the company’s margins have gone upwards. Gross margins moved from 31.5% in 2017 to 40.7% in 2023 while its annual revenue has jumped from over $5.5 billion in 2019 to over $10.2 billion in the past twelve months.
The net income has jumped from more than $350 million in 2023 to over $1.2 billion in the TTM. This makes it one of the fastest-growing companies in the sector.
However, there are questions about whether Chipotle can sustain its hefty valuation, which is nearing that of Nvidia. For example, the company has a forward PE ratio of 61 and a forward EV to EBITDA multiple of 42. These numbers are significantly higher than the sector median of 17 and 9.68.
On the other hand, Nvidia has a forward PE multiple of 53 and a forward EV to EBITDA ratio of 43. This means that Chipotle’s valuation is nearing that of Nvidia, the biggest company in the world.
This valuation difference is happening even as the two companies demonstrate different growth metrics. Chipotle’s revenue grew by 13.6% in the last quarter while Nvidia grew by over 200%. Its forward revenue growth was 14.30% while Nvidia has over 80%.
Chipotle is also more valued than other restaurants. For example, Starbucks and Yum Brands have forward PE multiples of 22 and 24 compared to Chipotle’s 62.
That explains why analysts are a bit cautious about the company. While most of them have a buy rating, the average target for the stock is $3,264, slightly above the current $3,215. In 2023, Jim Cramer placed his Chipotle stock forecast to $2,000.
The likely hope among investors is that Chipotle has more room to grow internationally. It already has 43 stores in Canada, 19 in the UK, and 8 in France and Germany. This means that it could grow and match that of KFC, which has over 29,000 stores globally.
Chipotle Mexican Grill stock price forecast
The weekly chart shows that the CMG share price has been in a strong bullish trend in the past few years. It soared to a high of $3,465, giving it a valuation of less than $100 billion.
The stock has remained above the 50-week and 100-week moving averages. It has also remained above the key resistance point at $2,167, its highest point in July 23rd. Therefore, the stock will likely have a pull back in the coming weeks and retest the support at $3,000.
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