Chipotle Mexican Grill (NYSE: CMG) continued a strong performance in its third quarter, with the company beating consensus expectations on earnings. The 8.6% revenue increase was driven by a comparable sales increase of 4.4% and 28 new store openings. This positive performance aided in the restaurant level margin expansion of 260 basis points. We expect these strong trends to continue in the fourth quarter as well.
In 2018 Chipotle has recorded nearly a 45% surge in its stock price. We have maintained our long-term price estimate for Chipotle at $468. In our interactive dashboard What’s the Upside for Chipotle if… we provide a scenario in which we estimate Chipotle’s Share Price in a situation where the ‘Catering and Delivery’ offering bolsters its same store sales by 2021. Below we detail the scenario further.
The company is expected to continue growing at 8-9% and post approximately $6.1 billion in revenue in the year 2021. It is expected that the Average number of restaurants will reach approximately 2971 by 2021 while expected revenue from each restaurant will touch $2.1 million. We expect the Net Income margin to continue improving and it is anticipated at 7.25% of Total Revenue in 2021. We also estimate the P/E multiple to be 26.65
In our scenario we estimate the expected revenue from each restaurant to reach approximately $2.3 million with a further improvement of 50 basis points in Net Income margin on the back of the growth in the ‘Catering and Delivery’ offering. Overall, for this scenario estimates result in an upside of $82 for Chipotle, which is almost 17.6% higher than our current Trefis Price of $468.
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