Chipotle Mexican Grill: Take a Bite of This Smoking Hot Deal

Key Points

• Chipotle stock is down because CEO Brian Niccol is leaving, and investors are buying the dip.
• Incoming CEO Scott Boatwright has been instrumental in forwarding Niccol's agenda and is a perfect fit for the position. 
• Analysts continue to support the market and see this stock setting new all-time highs soon. 

The news of Brian Niccol’s departure from Chipotle Mexican Grill NYSE: CMG is shocking but not a game-ender because of the culture he instilled in the business. His tenure as CEO altered more than the company’s reputation, setting it on a path for sustained growth that is unlikely to end. The fact that Starbucks NASDAQ: SBUX chose him to lead their ailing franchise, a large and cumbersome organization to change, is a testament to the quality he brings to the table. To briefly summarize his accomplishments at Chipotle, he is responsible for reinvigorating the brand, guiding it through the pandemic, leaning hard into digitization, and driving sustained double-digit growth and widening margin. 

Chipotle’s New CEO Is Ready to Continue Growing the Business

Among the risks for Chipotle investors is the unknown factor of who will be the next CEO. The interim CEO is the former COO, Scott Boatwright, a likely candidate. Mr. Boatwright joined the team one year before outgoing CEO Brian Niccol and has been instrumental in his success. Mr. Boatwright has been in charge of restaurant operations and is responsible for implementing the technological changes and culture that have led to the business's success. 

The new chairman of the board, Scott Maw, also a long-time veteran, says the company was well-prepared for the event due to its deep bench, including Jack Hartung. Mr. Hartung has been CMG’s CFO for over two decades and is extending the timeline until retirement to ensure a smooth transition. Mr. Niccol is officially scheduled to depart at the end of the month. 

The projects to oversee are plans to build new restaurants and international expansion, which are central to the growth and earnings outlook. The international expansion includes several new stores in development and could be worth 200% of revenue growth relative to 2024 annually over time. Until then, expanding store count, digital access, and the Chipotlanes are critical to deepening penetration of existing markets, opening new markets, and driving unit margins. The last earnings report included guidance shaded by an expectation for margin pressure, so there is a risk for the business. 

Analysts Lead Chipotle Higher: CEO Change a Nothing Burger 

If the analysts' response to the sudden CEO change is a clue, the move will likely be a nothing-burger for the stock price. The single analyst to issue an update within the first few hours of the news is Truist, which maintained a Buy rating and a $69 price target. The affirmation aligns with the trend, with the stock pegged at Moderate Buy and the stock price trending higher. The $69 target is above the consensus estimate, up nearly 50% in the last 12 months, and likely to continue trending higher, assuming growth rates and margins are maintained. 

Institutional support is also strong. The summer price dip triggered substantial volume buys from numerous institutions, increasing total ownership. The institutions now own more than 90% of the stock and provide a solid support base at the $50 level. 

Chipotle Mexican Grill Shows Solid Support at $50 

The price action in CMG shares may be hard for some investors to see, but it is an opportunity in the making. The market is showing robust support for this company at the $50 level, as highlighted by the record-level trading volume and Hammer Doji. The Hammer Doji has a long lower shadow, revealing an attempt to move lower offset by vigorous buying. This doji is compounded by the larger-than-usual green body, which shows bullish momentum overtaking bearish while confirming support at a critical level. The market for CMG may move sideways from this point until the next results are out, but lower prices than $50 are unlikely for this discretionary stock.