William Blair & Company initiated research coverage of Chipotle Mexican
Grill, Inc. (NYSE:CMG) ($73.60); (NYSE:CMG.B) ($69.03), one of the
country’s fastest-growing restaurant concepts,
with a Market Perform rating and Core Growth company profile.
Analyst Sharon Zackfia estimated that Chipotle, which offers a focused
menu of Mexican favorites (burritos, tacos, and salads) using
high-quality, fresh ingredients, would earn $2.58 per share in 2008 and
$3.17 per share in 2009.
“Chipotle’s strong
sales and streamlined operations offset higher-than-average food costs
(stemming primarily from higher-cost naturally raised meats), yielding
strong 40%-plus cash-on-cash returns at maturity and pretax unit-level
return on invested capital (ROIC) of over 25%,”
Zackfia said. “Moreover, from nearly 800
locations today, Chipotle’s long-term
expansion prospects appear robust, with our saturation analysis
suggesting the potential to more than double the restaurant base if the
company can achieve just half the penetration it has already attained in
its home state of Colorado.”
“Although we view the current stock valuation
as attractive for long-term investors, we view the current environment
of slowing comp trends and escalating costs as potentially hampering
near-term stock appreciation, and are initiating coverage with a Market
Perform rating,” she added.
William Blair & Company, L.L.C. intends to seek or expects to receive
compensation for investment banking services from this company in the
next 3 months.
William Blair & Company, L.L.C. is a market maker in the security of
this company and may have a long or short position.
William Blair & Company, L.L.C. (www.williamblair.com)
is a Chicago-based investment firm offering investment banking, asset
management, equity research, institutional and private brokerage, and
private capital to individual, institutional, and issuing clients. Since
1935, we have been committed to helping clients achieve their financial
objectives. As an independent, employee-owned firm, our philosophy is to
serve our clients' interests first and foremost. We place a high value
on the enduring nature of our client relationships, the quality of our
products and services, and the continuity and integrity of our people.
For important disclosures and information regarding the firm’s
rating system, valuation methods and potential conflicts of interest,
please visit: http://www.williamblair.com/Pages/news_story_dept.asp?uid=1411&depID=4
Additional information is available upon request.
William Blair & Company, L.L.C.
Tony Zimmer
312-364-8611
tzimmer@williamblair.com
