Analysts discuss what to do with Chipotle stock after CEO transition

(Updated – August 14, 2024 8:04 AM EDT)

The recent announcement of Brian Niccol’s departure from Chipotle Mexican Grill (NYSE:) to become CEO of Starbucks sparked a significant stock move for both companies, as well as a flurry of opinions among analysts, with many debating the future of Chipotle’s stock.

TD Cowen remains bullish on Chipotle, maintaining a Buy rating and a $105 price target on the stock. The bank said in a note that investors generally believe Niccol’s successor will eventually stabilize U.S. traffic, but concerns linger about long-term margins and valuation.

TD Cowen’s report highlights that the pullback in Chipotle’s stock might be an attractive entry point, given the company’s solid strategy in operations, marketing, and digital innovation. They add that bulls are optimistic, citing a $120 price target based on a 30x FY1 P/E ratio, while bears worry about the potential for traffic deceleration over the next year.

Evercore ISI, however, has a more cautious outlook. They have reduced their price target from $65 to $59, reflecting concerns over the CEO transition. However, they maintained an Outperform rating on the stock.

While Evercore acknowledges the strong foundation Niccol has built at Chipotle, they believe that his departure warrants a lower target multiple. Despite this, Evercore still sees 15% upside potential, confident in the management team’s ability to execute the established strategy.

Stifel also maintains a Buy rating, emphasizing that Chipotle’s strategic priorities remain intact. They highlight the company’s growth potential through new Chipotlane units and improvements in digital and technology capabilities.

However, Stifel warns that retaining top talent will be crucial to avoid disruption during the transition.

KeyBanc Capital Markets echoes these sentiments, recognizing the market’s reaction as indicative of the significance of Niccol’s departure. They stress that the improvements under Niccol provide a strong foundation, but they caution that any further leadership departures could pose additional risks.

Overall, while the analysts acknowledge the challenges posed by the CEO transition, they remain bullish on Chipotle shares.