Mizuho has upgraded Chipotle Mexican Grill to Outperform from Neutral and increased its price target to $40 from $37, citing recent data that the firm interprets as evidence of a near-term inflection in comparable sales following a period of weak growth.
The brokerage now expects first-quarter same-store sales to be flat, a revision from its prior forecast of a 0.4% decline and notably stronger than consensus expectations for a 1.1% drop. Mizuho reports that trends firmed through March, and it sees improving traffic underpinning an above-consensus forecast of 1.5% comparable sales growth for the second quarter.
Mizuho attributes the sales pickup to a combination of menu and marketing activity - specifically the return of Chicken Al Pastor, heightened promotional activity and continued expansion in digital orders. The firm believes these initiatives, together with an emphasis on value and ongoing menu innovation, could sustain additional sales acceleration through 2026, helped by easier year-on-year comparisons.
On margins, Mizuho said a sustained period of analyst estimate cuts is approaching a close. The firm still anticipates a final round of modest downward revisions driven by relatively low menu price increases and lingering cost pressures, but it expects margin expansion to resume in 2027 as pricing and sales normalize.
Regarding unit economics and growth, Mizuho noted that Chipotle's unit expansion remains steady and does not expect a slowdown from the current pace. The brokerage projects a return to mid-teens annual EBITDA growth beginning in 2027.
Mizuho also modestly raised its 2026 earnings estimate and indicated that the stock's current valuation appears overly pessimistic relative to its longer-term growth trajectory, a factor supporting the upgrade.
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Bottom line - Mizuho's upgrade reflects a view that recent operational initiatives and improving traffic are driving a nascent recovery in comparable sales, while margin pressure is expected to ease over time with expansion resuming by 2027.