Fast food Mexican restaurant chain Chipotle is "better, faster" and "stronger" heading into the new year, according to Cowen, who just named the stock one of its best idea of 2020. The firm upgraded shares of Chipotle to outperform from market perform and hiked its price target to $970 per share from $800. Chipotle shares closed at $786.51 a share on Monday. "We see upside to comps and EPS from digital sales growth, increasing consumer demand for food transparency, and a growing ad budget and loyalty program," Cowen research analyst Andrew Charles said in a note to clients on Tuesday. Shares of Chipotle are up nearly 70% in the last 12 months, thanks to its "digital moat," which has driven earnings each quarter. Last month, the restaurant chain crushed earnings expectations and announced plans to accelerate its introduction of drive-thru lanes. Charles said Chipotle is well positioned to reclaim its historical peak of $2.5 million average unit volume in 2021. Based on a growing mix of digital sales for pickup and third-party delivery, Cowen said Chipotle has room to nearly double from 18% of sales today to 34% in the next five years. "The digital strategy will be further enhanced in the coming years from a new digital drive-thru format, known as Chipotlane, that we expect to further drive digital sales mix," said Charles. Charles said Chipotle's new drive-thru plans can boost the brand's store count to 5,000 U.S. locations, if not more. Cowen raised its same-store sales estimates for the fourth quarter of 2019 and for the full years of 2020 and 2021, where digital should fuel 80% of the estimates, Charles said. "Unlike most competitors, virtually every Chipotle location has a second assembly line to provide capacity for digital orders, that are now fully digitized for faster prep times," said Charles. Shares of Chipotle jumped 3.7% Tuesday. —with reporting from CNBC's Michael Bloom.
A chicken burrito, guacamole, bag of tortilla chips, and a drink are arranged for a photograph at a Chipotle Mexican Grill Inc. restaurant in El Segundo, California, U.S., on Wednesday, July 25, 2018.
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