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Chipotle (CMG) is climbing 2% after Morgan Stanley upgraded the shares to Overweight from Neutral.
Why Morgan Stanley Has Become More Bullish on CMG
CMG's demand has been uneven, but the company is not facing any major issues, Morgan Stanley believes. Moreover, CMG should continue to benefit from its strong product, marketing, and quick service times, the investment bank believes.
A chef plating up a wide variety of dishes for a restaurant chain.
Also importantly, the restaurant chain will probably be a leader when it comes to utilizing automation, according to Morgan Stanley. As a result, its costs are likely to remain relatively low, keeping its margins fairly elevated and enabling it to keep its price hikes under control.
Moreover, the company should also benefit from adding new restaurants going forward, including overseas, while CMG's balance sheet is strong. The investment bank placed a $70 price target on the shares.
More Information About CMG
CEO Scott Boatwright recently indicated that the company would not raise its prices in response to costs that it incurs due to higher tariffs.
Analysts on average expect its EPS to rise to $1.29 in 2025 from $1.12 in 2024.
In the last month, the shares have fallen 6%, while they are down 9.5% in the last three months.
While we acknowledge the potential of CMG, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CMG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ ALSO 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock
Disclosure: None. This article is originally published at Insider Monkey.