Chipotle Receives Optimistic Calls from Analysts

Chipotle Mexican Grill’s efforts to recover, which include the designation of a new chief executive officer and the promotion of a new delivery partnership, could be steps to the right direction, based on the statement of Piper Jaffray.

The firm emphasized its overweight rating on the restaurant company’s shares, saying that Chipotle’s stock price could beat $530 in just a year. This is the highest target on Wall Street, implying 25 percent upside from its Friday’s close. The previous target of Piper was $240.

“Chipotle shares remain a top recovery pick. When, and as (not “if”) the recovery unfolds, meaningful leverage exists,” said analyst Nicole Regan in a note issued on 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.”

Brian Niccol has been appointed as the chief executive, arriving with a successful track record at Taco Bell. In addition, the new delivery partnership has also supported the stock and sales, according to Regan. It also justified same-store sales estimates in excess of 2 percent.

Chipotle shares climbed 0.7 percent during the premarket trading after Piper Jaffray’s positive call. The shares are already 47 percent higher this year.

Niccol has built a reputation for menu innovation at Taco Bell. He has recently said that while investors shouldn’t expect large changes to the company’s offerings, some items like breakfast burritos are not out of the question.

“Job No. 1 is to remind people why they love Chipotle,” said Niccol. “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.”

Such initiatives are potentially good news to investors, including Pershing Square activist Bill Ackman, who sports a leveraged 10 percent stake in the company. He did that to encourage ideas like drive-thrus and breakfast offerings in a move to reignite the beleaguered shares after a series of food safety scandals.

“We’re not just betting on a recovery from the food safety issue. This is one of the least optimized of the quick-servicee restaurants,” said Ackman last November.

Ackman is not the only investor that is willing to give the restaurant another shot.

Shares of Chipotle Mexican Grill has already soared 70 percent since the casual Mexican eatery announced Niccol’s takeover on February 13. Meanwhile, a recent hike to menu prices supported the Mexican eatery post better-than-expected earnings during the previous months.

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