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Chipotle (CMG) Earnings Preview

by | Jul 20, 2021

Chipotle (CMG) reporting earnings tonight after the close with the Street looking for $6.49 on $1.88B in sales. Next quarter is guided to $6.29/$1.87B and the FY is $24.51/$7.38B, a 23% increase Y/Y. Shares have closed lower in six of the last seven reports with an average closing move of 5.2% and a max move of 12.15%. The current implied move is 4.15%. Shares have been very strong since the March 2020 lows and consolidating in a monthly bull flag since January under $1575. A breakout targets a longer-term run to $1850. Support below is around $1475, VWAP from the recent May lows. CMG has seen mostly bullish flow since March, smaller size but high-dollar trades. In June, the January $1960 calls were bought for $550K while the December $2300 calls have over 1450X in open interest, a more than $800K trade. The $44.5B company trades 48X earnings, 7X sales, and 42X cash. CMG has seen sales steady despite the reopening as dining rooms reopen and digital sales continue to outperform. The company recently announced menu price hikes of 4% with more likely in the Fall to help mitigate labor cost and materials headwinds. Analysts have an average target for shares of $1666 with a Street High $2100. Wells Fargo raising estimates on 7/14 expecting Chipotle’s results to come with some negative headlines around throughput and as management re-bases investors off prior AUV/store margin algorithm. However, the former is temporary, and the latter was fleshed-out throughout the quarter, and shares could actually benefit from getting the negative headline out of the way. Baird positive on 7/13 and thinks Q2 will exceed estimates. The analyst continues to think CMG is well positioned to sustain positive operating momentum in the second half of the year with opportunity for the company to accelerate high-ROIC unit expansion in 2022 and beyond. Stephens expecting a beat on SSS as June openings came in strong. Cowen checks showed that sales accelerated through the quarter and would be a buyer after a good quarter as CMG shares tend to sell off after earnings. Short interest is 2.8%, down near 4-year lows. Edgewood Management a top buyer and now has 1.28M shares. Pershing Square has a 1M share position. Hedge fund ownership fell 2% in Q1. CMG insiders have been active too with a $1M buy from a director in April at $1485 and a different director buying $340K in stock at $1478 in March.

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