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Key Takeaways

• Chipotle stock outperformed the broader market, rising nearly 2% in recent trading Monday.

• Morgan Stanley analysts raised their price target for the chain, arguing that its long-term prospects remain strong.

• They anticipate that Chipotle's investments in new technology will reduce expenses, contain price increases and keep the eatery competitive.

Chipotle stock rose Monday, lifted by an upbeat assessment by analysts at Morgan Stanley.

Burrito chain Chipotle Mexican Grill (CMG) has solid fundamentals despite recently sluggish sales and dips in profit margins, Morgan Stanley analysts said. The company is poised to reduce its expenses by adopting technology, use this savings to “underprice” competitors and bolster its finances through expansion, they said.

The shares were recently up about 2%, though they're down about 9% this year. Morgan Stanley raised its price target to $70, a few dollars above the average price target among analysts polled by Visible Alpha and about 30% above Friday's close. It also upgraded the shares to "overweight" from "equal weight."

“As the stock has continued to fade on weak sales data and growth stock pressures, an opportunity to step in has presented itself if one thinks these are short term headwinds,” the analysts wrote. “We're optimistic about how it evolves.”

Morgan Stanley said Chipotle has historically raised prices more slowly than its peers, and most recently, demonstrated a commitment to value by ensuring customers are given substantial portion sizes. Chipotle will initially absorb higher expenses incurred under tariffs rather than raise prices, CEO Scott Boatwright told NBC over the weekend.

Due to its investment in automation and AI, Chipotle “may be in the unique position of underpricing the competition for many years to come, to maintain or even widen price gaps and protect value prop for the long run, which should in turn help traffic,” Morgan Stanley's note said.

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