Tuesday, May 23

Chipotle: Overbought After Record-Breaking Performance?

After worrying about inflation slowing the economy too much, the analyst team here at Moby.co was really excited to see last week's earnings calls in retail. Basically, consumer spending is shifting, but staying resilient under inflationary pressure. That's a really encouraging sign for the health of our economy. 

Because of that, we're returning to one of our big picks from last year: Chipotle Mexican Grill ($CMG).  Chipotle was a big part of our thesis surrounding inflation and consumer spending (read our initiating coverage here), and they absolutely lived up to our bull sentiment. CMG soared past our first price target and hasn't looked back since they stunned the market with their Q1 earnings. 

Basically, Chipotle raised prices pretty steeply in 2022, which made a lot of investors nervous about their short-term growth. But last month, Chipotle's earnings call not only showed a huge increase in sales, but CMG also managed to boost their margins in the process.

Despite a punishing inflationary spike from Q1 2022 to Q1 2023, CMG managed to pull off favorable growth in that period. It's hard to put into words how masterful a move this was.

Chipotle has demonstrated a laser-focused logistical and executive framework that helped the brand thread the needle of inflationary pressures and supply chain disruptions. 

There's so much to love about Chiptole's growth in the last six months, but right now the market is so desperate for wins that CMG might be a little overbought.

Moreover, the executive team is on the back 9 of their proposed store expansions, so the real concern is whether or not CMG can continue to rise to the market's elevated expectations. 

So, as we take you through the details here, keep in mind that we're setting a slightly more conservative strategy than other analysts. We'd rather not get caught up in market mania and crash into CMG's ceiling.

Our analysis here is going to give the stock a little room to come back to earth in case there are diminishing returns or a more extended market hiccup. 

We really do love the details here though, so let's explore what we're working with below 👇

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