SunTrust: Chipotle's Same-Store Sales Recovery 'Will Start…Now!'

Courtesy of Benzinga.

SunTrust Robinson Humphrey issued a company report on Chipotle Mexican Grill, Inc. (NYSE: CMG) after the company reported 4Q15 earnings. The firm rates Chipotle as a Buy, with a  price target lowered from $544 to $520.

Analyst Jake Bartlett wrote, "Over shadowing its 4Q EPS beat, CMG disclosed weak January SSS (-36 percent) and guided '16 G&A far above our estimate (+26 percent Y/Y). While we are disappointed to lower our EPS estimates once again, we expect the stock to trade with SSS trends. We are heartened as CMG takes bold steps to reignite sales, including spending 6 percent of sales on marketing/promotion (4x the typical level)."

Related Link: Goldman Likes Chipotle's Long-Term Value, Sees $550 Per Share

SunTrust gave two key takeaways on why they see strength in Chipotle's stock going forward:

1. Top-line growth

While Chipotle reported lower-than-expected margins of 19.6 percent, analysts at SunTrust believe credit card data may show that Chipotle's food remains in high demand, which has the potential to drive positive sediment regarding top-line growth. Furthermore, analysts believe that CMG's all-employee meeting on February 8 will drive confidence in its food products and potentially increase traffic in the stores.

2. Aggressive promotional efforts

Analysts noted that Chipotle expects to spend 6 percent on marketing, particularly in mobile platforms to reach a younger audience. These efforts can both increase sales and drive increased profit margins for the company, while also allowing them to drive same-store sales growth.

Posted-In: Jake Bartlett SunTrust Robinson HumphreyAnalyst Color Price Target Restaurants Analyst Ratings General Best of Benzinga