Chipotle Mexican Grill Inc. (CMG) is a strong buy due to the restaurant chain opening new locations, raising its prices, and updating its menu, according to Goldman Sachs. This could bode well for the American Century Mid Cap Growth Impact ETF (MID).
In a client note issued on Tuesday, Goldman Sachs analyst Jared Garber wrote: “We continue to view Chipotle as one of the most compelling growth stocks in the industry given the strong top-line (unit growth and same-store sales) and leading margin profile.”
At Yahoo! Finance, Brian Sozzi reported that analysts are expecting same-store sales to increase somewhere between 5% to 9% as more people have returned to in-person dining. Chipotle also raised its menu prices by 4% in August, which is expected to have improved sales. Chipotle will report its third quarter earnings on October 25.
“Our brand is positioned in a really great spot,” Chipotle CEO Brian Niccol said at the Yahoo Finance All Markets Summit. “Obviously, we have some higher household income on average in our customers. We also skew younger but we serve pretty much all income groups. And I don’t love to see some of the lower income groups being impacted the way they have, but we’re fortunate that we’re positioned the way we are with our commitment to food with integrity.”
Garber noted that easing food costs should also boost Chipotle’s profits. “Food cost pressure appears to be easing, room for possible margin upside,” he wrote before adding: “Overall, we see less risk that inflationary food costs will drive an earnings/margin miss for Chipotle in 3Q22/4Q22, and believe that the less inflationary environment does give the company more price cushion should they begin to see consumers becoming more price-conscious.”
Chipotle is the third-largest holding in MID as of September 30, with a weighting of 5.66%. MID seeks to invest in mid-cap companies that generate or could generate social and environmental impact alongside financial return.
Per its product website, the fund uses proprietary fundamental research to:
- Identify mid-cap stocks that managers believe will increase in value over time.
- Identify companies that, according to the United Nations Sustainable Development Goals (SDG), generate, or could generate, ESG impact alongside financial return.
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