Chipotle Mexican Grill (NYSE:CMG): A $1,000+ Stock? - Janney

Janney is making Glory Hound call on Chipotle Mexican Grill (NYSE:CMG) calling it a $1,000+ stock in the long-run.

(Got your attention, didn't I?)

Well, their actual 12-month target is a mere Street high of $375 (prev. $330) as their estimates for 2011/12 move above consensus.

The details:

Based on favorable feedback from multiple industry sources, we raise our 2011 and 2012 EPS estimates for Chipotle Mexican Grill (CMG $289.54; Buy) by nine cents and 35 cents, respectively, to $6.85 and $8.45. Each of these figures lies four cents above First Call consensus.

Looking specifically at Q2 2011, we take up our same-store sales forecast to 8.5% from 6.5%, above the Consensus Metrix figure of 7.8%. This drives our Q2 EPS estimate upwards by two cents, to $1.72 (four cents above First Call consensus).

Over time, we view the long-term potential of the Chipotle concept as 3,000-4,000 in the U.S., at least 2,400 in Europe, and at least several hundred in the Asia/Pacific region. This is at least 6,000 worldwide outlets for the Chipotle concept. But we do not believe Chipotle views itself as “just” a burrito company. Indeed, the first of the company’s ShopHouse Southeast Asian Kitchen restaurants is scheduled to open this summer in Washington D.C. Over the long run, it’s entirely possible that the company could host 3-5 concepts under its belt -- each focused on high-quality ingredients, fine-dining cooking techniques, and speedy customer service (albeit through different cuisines).

If -- if -- Chipotle can reasonably keep up its unit growth rate by decade’s end, then the range of P/E multiples we apply to the 2020E EPS range of possibilities (from $30.00 to $45.00) is from 20x to 30x. This sensitivity analysis suggests a year-end 2020 stock price of $600 to $1,350, with the middle portion of our assumptions getting us to a year-end 2020 stock price of $788 to $1,100. Discounting the possible year-end 2020 stock price back to today at a 10.0% discount rate generates a fair value estimate today ranging from $254 to $573. This middle portion of our assumptions, discounted back at a 10.0% rate, provides us with a possible fair value estimate between $334 to $467. With this note, we officially update our fair value estimate to $375 from $330, which is in the lower half of this middle portion of our sensitivity analysis.

Fantasizing about a best-case “what if?” scenario, the table above also includes a (very) long-term unit count potential of 10,000 restaurants, generating an average $2.7 million in annual sales, and a company-level operating margin of 20.0%. This suggests a (very) long-term EPS of over $111.

Dare to dream!

Chipotle Mexican Grill remains our top restaurant-stock pick for 2011, and we reiterate our Buy rating on it.

Notablecalls: It's not every day you see such targets (even the l-t kind) coming from from a sell side shop.

Janney has played their hand in CMG pretty well, keeping their cool while others have downgraded the name due to high valuation and whatnot.

I suspect the $1,000+ target will create some excitement among investors and traders in the n-t.