Bull Note Sends Chipotle Stock to Record Highs

The equity is already up over 68% year-over-year

Digital Content Manager
Dec 16, 2020 at 11:28 AM
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The shares of Chipotle Mexican Grill, Inc. (NYSE:CMG) are up 4.8% at $1,412.04 at last check, and earlier scored a new record high of $1,419.11, after the restaurant chain earned an upgrade from Stifel to "buy" from "hold," as well as a price-target hike to $1,500 from $1,400. The analyst noted that the company has "some of the most compelling unit growth prospects within the restaurant industry," which could eventually translate to a 5-7% jump, adding that Chipotle should benefit from several sales-building initiatives in the year ahead.

Digging deeper, Chipotle stock has staged an impressive recovery since dropping to a March 18, annual low of $415. Only a couple of months later, the security was nabbing record highs on a regular basis, and has now more than tripled off this bottom. And while shares appeared to have hit a plateau, today's bull note has helped CMG break through overhead pressure at $1,350 mark, with additional support from the 100-day moving average. Longer term, the security is up 68.6% year-over-year.

Analysts were split toward the security coming into today, with 13 of the 25 in question sporting a tepid "hold" rating, while the remaining 12 carried a "strong buy." Meanwhile, the stock's 12-month consensus target price of $1,402.11 is right in line with current levels. Should some of these bears begin to follow Stifel's lead, it could put additional wind at CMG's back.  

Drilling down to today's options activity, more than 7,447 calls and 4,129 puts have already crossed the tape, which is four times what is typically seen at this point. Most popular is the monthly December 1,450 call, followed closely by the 1,400 call in the same series, with positions being opened at both. In simpler terms, investors are expecting today's gains to hold by the time contracts expire at the end of the week.

Now certainly look like the perfect opportunity to take advantage of CMG's next move with options. The security's Schaeffer's Volatility Index (SVI) of 32% sits in the extremely low 12th percentile of its annual range. This means the stock currently sports attractively priced premiums.

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