Goldman Sachs On Chipotle Mexican Grill: Investors Willing To Pay Big Multiple For A Big Burrito

Karen Houlthouse of Goldman Sachs resumed coverage of Chipotle Mexican Grill, Inc. (NYSE: CMG) on Monday with a $790 price target.

"Not only is Chipotle Mexican Grill one of few concepts well positioned for the "real food" movement, but it has still significant untapped latent comp drivers," Houlthouse wrote in a note. The analyst adds that the company can confront the movement through increased marketing spend, mobile initiatives, pricing power and long-term store economics.

Houlthouse adds that Chipotle Mexican Grill is one of the best multi-year comp stores in restaurants, despite risks on the cost front including food inflation. The analyst states that while food inflation is a concern, Chiptole Mexican Grill didn't see much fallout from its previous round of price increases.

Houlthouse also states that millennials tend to have a below average opinion of food quality among restaurants with Chipotle Mexican Grill being an exception.

Houlthouse conducted a 15- to 20-year discounted cash flow analysis where the company operates 4,500 total units and calculated shares have an implied valuation of $830. The analyst adds that the calculation implies the company's two concept restaurants (Shouphouse and Pizzeria Locale) are "free options," essentially implying investors are getting the restaurant concepts for free.