Mexican fast-food chain Chipotle (CMG) is making a risky bet by increasing the price of items on its menu to combat inflation. The chain will increase prices by 2% to help offset the cost of goods used on its menu. The company argues it will still be a better value than rival offerings even with its increased prices.
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Chipotle’s leadership weighed delaying a price increase to help keep customers around. However, it went with the increase, which analysts argue could be a sign that demand for its food beats out consumers’ inflation concerns. If that holds true, CMG should have increased earnings.
Will Chipotle Consumers Continue Commerce after Price Hikes?
Based on recent history, a price increase at Chipotle is unlikely to deter customers from eating at the chain’s stores. The Mexican fast-casual chain has continued to see demand for its goods despite increasing menu prices six times since 2021. The latest menu price hike is already in effect at about 20% Chipotle locations and will likely hit others over the next few weeks.
Baird analyst David Tarantino, who has a five-star rating at TipRanks, argues that a price increase “will likely be digestible.” The analyst also agrees with the company’s leadership, claiming that Chipotle’s food is still a “better overall value than other options.”
Tarantino is bullish on CMG stock, with a Buy rating and a $70 price target. This translates to a potential increase of 10.23% over the next 12 months.
Is CMG Stock a Buy, Sell, or Hold?
Turning to Wall Street, the analysts’ consensus rating for Chipotle is Moderate Buy based on 13 Buy and seven Hold ratings over the last three months. With that comes an average price target of $65.95, a high of $72, and a low of $56. This represents a potential 3.74% upside for CMG shares.
