Key Points
Chipotle's stock is much cheaper than it was a year ago.
Bargain-hunting investors might want to pick up some shares.
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Shares of Chipotle Mexican Grill (NYSE: CMG) rose on Friday, following positive remarks from a respected investment bank's research team.
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Chipotle's discounted stock price could be a profit opportunity for investors
Analysts at JPMorgan Chase upgraded Chipotle's stock from neutral to overweight (read: buy). After meeting with CEO Scott Boatwright and chief financial officer Adam Rymer, JPMorgan's team sees the restaurant chain's stock price rising nearly 20% to $35.
Even after today's gains, Chipotle's shares are down 44% over the past year. With its price-to-earnings (P/E) multiple roughly cut in half during that time, JPMorgan's analysts believe the stock now offers investors a much more attractive risk-to-reward profile and better reflects more subdued growth expectations.
CMG PE Ratio data by YCharts
More moderate, but sustained, growth could drive solid long-term returns
Chipotle's days as a rapidly expanding business are likely over. JPMorgan projects a relatively modest 8% to 9% annual increase in revenue for the fast-casual chain.
Margin expansion will also be harder to come by. The analysts noted that Chipotle is investing more in its employees and technology to improve the customer experience at its restaurants.
Yet JPMorgan's team did highlight a potentially lucrative opportunity for Chipotle to expand internationally, which it argues is not fully reflected in its depressed share price.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends the following options: short June 2026 $36 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
