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Chipotle Mexican Grill, Inc. (CMG): This Mexican Grill Is A Good Buy Today

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Chipotle Mexican Grill, Inc. (NYSE:CMG) has recently been upgraded from a neutral rating to an outperform rating by the analysts at Wedbush. As a result of the news Chipotle Mexican Grill opened up on Monday at a higher price of $341.91. Chipotle operates fresh Mexican food restaurants serving burritos, tacos, burrito bowls, and salads. Chipotle Mexican Grill operates 1,410 restaurants.

Growth Drivers

Food with integrity

Chipotle Mexican Grill, Inc. (NYSE:CMG)Chipotle Mexican Grill, Inc. (NYSE:CMG) has always focused on quality and hygiene. It has incorporated in its vision the unique concept of “Food with Integrity”. Chipotle offers a value proposition of better food produced using organic ingredients. The use of the organic ingredients in producing food products has become the USP for Chipotle. Chipotle claims to serve more naturally raised meat than any other restaurant chain. Chipotle focuses on using high-quality raw ingredients, classic cooking methods and distinctive interior design in order to attract and retain customers.

As a strategy to involve people in its “Food with Integrity” concept, Chipotle has announced its plan to host cultivate festivals in San Francisco, Denver, and Chicago. The festivals are a one day event and include cooking demonstrations by celebrity chefs, live music, a special Chipotle festival menu, etc. emphasizing fresh food made with sustainable and organic ingredients. The whole idea behind these events is to educate people about how food can be raised responsibly.

Expansion Plans

Chipotle Mexican Grill, Inc. (NYSE:CMG) operates 1,410 restaurants out of which 1,399 are located throughout the United States, five are located in Canada, five are located in London and one in Paris. The company has grown substantially over the past five years. Chipotle expects to open between 165 and 180 additional restaurants in 2013. The future growth of Chipotle will be driven by its expansion plans.

Changing Consumer Preferences

In 2013, with the changing consumer preferences traditional fast food companies like McDonald’s and Yum! Brands, Inc. (NYSE:YUM) are expecting a tough year, while companies like Chipotle are expecting growth. The biggest reason is the unique positioning of Chipotle. Chipotle has positioned itself in the sweet spot between traditional fast food and waiter service. The ambiance of Chipotle’s fast-casual restaurants, and its emphasis on fresh ingredients has been successful in attracting and retaining people who do not mind paying about twice as much to eat at the Chipotle’s restaurants than at an eatery like McDonald’s or Taco Bell.

Strong Financials

The year 2012 proved to be a good year for Chipotle Mexican Grill, Inc. (NYSE:CMG) as it posted positive financials. In 2012, revenue increased to $2.73 billion with an increase of 20% over the previous year 2011. Net income for Chipotle increased to $278 million, marking an increase of 29% over the previous year. The restaurant sales increased 7.1% in 2012 and the diluted earnings per share was $8.75, an increase of 29.4% over the previous year. It opened 183 new restaurants in 2012. Restaurant level operating margin increased 110 basis points over 2011 to 27.1%.

Chipotle is expected to announce its first quarter 2013 results on 18 April, 2013 and the results are expected to be positive.

Chipotle’s stock analysis

Chipotle Mexican Grill, Inc. (NYSE:CMG) is enjoying a bullish trend since touching a low of $236 in October 2012. Currently the stock is trading at the level of $344. The positive outlook is due to the great financial performance shown by Chipotle in the previous quarter. Chipotle enjoys a market capital of $10.73 billion. The quarterly revenue growth of 0.17 year on year for Chipotle is better than the industry’s growth of 0.09. The operating margin and gross margin for Chipotle exceeds the industry’s margin.

Competitors

The competitors of Chipotle Mexican Grill, Inc. (NYSE:CMG) include: Jack in the Box Inc. (NASDAQ:JACK) and Darden Restaurants, Inc. (NYSE:DRI).

Jack in the Box Inc. (NASDAQ:JACK), with its subsidiary Qdoba Restaurant, operates restaurants with the name of Qdoba Mexican Grill in the United States. Qdoba operates with about 600 fast casual restaurants throughout the United States. The company trades at $35, with a market cap of about $1.5 billion.

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