Chipotle Mexican Grill's (NYSE: CMG) recovery efforts, including the appointment of a new chief executive and a new delivery partnership, represent steps in the right direction, according to Piper Jaffray.
The firm reiterated its overweight rating on the restaurant company's shares, predicting Chipotle's stock price could top $530 in 12 months, the highest target on Wall Street and implying 25% upside from Friday's close. Its previous target was $420.
"Chipotle shares remain a top recovery pick. When, and as (not "if") the recovery unfolds, meaningful leverage exists," analyst Nicole Regan wrote Sunday. "Our positive bias is based on culture change, strong unit-level economics and solid balance sheet. Catalysts include operational excellence, brand remodeling, and capital deployment."
The appointment of Brian Niccol as chief executive officer – who arrived with a successful track record at Taco Bell – as well as a new delivery partnership with DoorDash have supported the stock and sales, Regan explained, and justify same-store sales expectations in excess of 2%.
While new CEO Niccol built a reputation for menu innovation at Taco Bell, he recently told the media that while investors shouldn't expect major changes to the company's offerings, items like breakfast burritos aren't out of the question.
"Job number one is to remind people why they love Chipotle," Niccol said in March. "I think there [are] opportunities to use what we have and present it in new forms, new varieties, to get people re-engaged with what they love about Chipotle."
Shares of Chipotle rose $1.15 in early morning trading to $426.05, following Piper Jaffray's optimistic call. The shares are up 47% this year.
