Chipotle (CMG) has been winning over investors, with shares up nearly 40% year to date amid a tough restaurant landscape as consumers pull back due to higher prices.
An analyst believes the fast food restaurant could take further steps to keep the flame burning in the long term.
Chipotle’s extended hours are one of the factors playing a role in this, following the 50-for-1 stock split on Wednesday, according to Bernstein analyst Danilo Gargiulo, who has an Outperform rating and an $80 price target on the stock.
Both Wall Street and Main Street have long anticipated the burrito chain’s late-night or breakfast hours.
Revamping Chipotle’s loyalty program could also boost sales. As chains ramp up personalized offers through rewards, Chipotle could also increase its own loyalty benefits. Although the chain doesn’t mention how many rewards members it has, digital sales represented 36.5% of total food and beverage revenue in the first quarter.
Chipotle’s core demographic, Generation Z, also represents an important runway for the company as it increasingly makes decisions in households.
Gargiulo wrote that Gen Z has a significant brand connection with Chipotle and engages with the brand more than its peers on TikTok, which tends to target a younger audience of primarily 18- to 24-year-olds.
Chipotle has 55.4 million likes on the social media platform, while CEO Brian Niccol’s old haunt, Taco Bell (YUM), trails with 51.7 million likes. Further behind are McDonald’s (MCD), with 30.1 million likes, and Wendy’s (WEN), with 20.6 million.
In addition to these three long-term drivers, Gargiulo noted that Chipotle’s strength in the category provides another tailwind for the company.
Chicken is gaining popularity, as Yahoo Finance previously reported, and the cheaper protein is easier on consumers’ tighter wallets, aligns with healthy eating trends and gives companies more room for innovation. Gargiulo predicts the chicken market will grow 7% in limited-service restaurants over the next five years.
The casual dining market in Latin America is also growing rapidly. This grew by 8% from 2018 to 2023 and is expected to grow by a further 6% from 2023 to 2028.
Investors hope that the momentum of recent quarters will continue. In the first quarter, Chipotle again exceeded expectations for revenue, profit and comparable store sales.
After the stock split, Chipotle’s shares are still trading at a higher price than when the company went public in 2006, at $22 per share. The stock was hovering around $62 per share at market close Thursday.
In a note to clients, TD Cowen analyst Andrew Charles wrote that the company believes Chipotle is “well positioned to deliver mid-single digit same-store sales in annual terms over the medium term,” driven by its omnichannel approach, Chipotlane drive-through innovation and consumer interest in ingredient transparency. Charles now has a price target of $72 on the stock.
Normally, stock splits are bullish for companies that execute them. As Yahoo Finance’s Seana Smith reported following Nvidia’s (NVDA) 10-for-1 stock split earlier this month, stock splits a year later typically show an average return of 25%, versus about 12% for the broader market, according to analysis from Bank of America.
So far this year, Chipotle shares have risen 38%, outpacing the S&P 500’s (^GSPC) gain of 15%.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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