Fast casual restaurant chain Chipotle Mexican Grill (CMG) is raising its menu prices to help it better manage surging input costs. News of the price hikes has CMG stock up 4.5% on the day.
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Chipotle’s costs on everything from beans and rice to avocado are on the rise, and so it is raising prices. Price increases tend to make people look for lower-cost alternatives, so the price hikes may have a negative impact on the business in the near-term. However, analysts and investors seem to feel that, in the long run, customers will accept the price hikes at the popular restaurant chain.
Chipotle’s new chief financial officer (CFO) Adam Rymer said that a “modest” price rise will not matter to most customers as Chipotle remains the best value in the field.
Strong Sales
Chipotle’s most recent financial results were strong, with comparable restaurant sales up 6% year-over-year. However, Chipotle did face a social media backlash earlier this year over perceptions that the company reduced its portion sizes.
Chipotle last raised prices in October 2023, with a separate hike for its California locations due to a change in that state’s minimum wage law. CMG stock has risen 40% this year.
Is CMG Stock a Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on CMG stock based on 12 Buys and seven Holds assigned in the past three months, as indicated by the graphic below. After a 42.92% rally in its share price over the past year, the average CMG price target of $65.78 per share implies 3.36% upside potential.
