CMG Gets Boost on Bull Note Before Earnings

Chipotle will report earnings after the close, tomorrow

Deputy Editor
Oct 20, 2020 at 1:56 PM
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Burrito purveyor Chipotle Mexican Grill, Inc. (NYSE:CMG) is all set to enter the earnings confessional tomorrow afternoon, after the close, and it looks like analysts are already speculating on an impressive report. J.P. Morgan Securities just upped its price target to $1,115 from $1,040. Though the analyst held its neutral rating, it noted that Chipotle's data has gotten consistently better over the past couple months, with quick service and all-store sales seeing improvement in September. J.P. Morgan did add, however, that the "recovery trade" is already "deeply played," and that monthly improvement is now a given for most securities. 

The note has CMG surging, up 1.4% at $1,356.18 at last check, and eyeing its highest close since its early September record highs. The security has been enjoying some close support at the 10-day moving average, while its late-September pullback saw a bounce off the 60-day moving average a little lower down. CMG now boasts a 61.6% year-to-date lead, and could be ready to string on its fifth weekly win, should the equity keep climbing. 

CMG Oct 20

Its been a mixed bag for Chipotle, as far as post-earnings moves during the past two years are concerned. The equity finished higher after four of its past eight earnings reports, which includes a 12.1% next-day pop last April. This time around, the options pits are pricing in a 9.1% post-earnings swing, which tops the 6.3% move CMG averaged over the past two years, regardless of direction. 

Speaking of options pits, Chipotle's are fairly tame today, with only 1,587 calls and 1,357 puts traded so far, just a fraction of what's typically seen. A look back shows a penchant for puts in the past 10 weeks, though. In fact, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 1.39 puts were picked up for every call during this time period. This ratio stands higher than 73% of all readings from the past 12 months too, suggesting a healthier-than-usual appetite for long puts of late. 

Analyst sentiment has been lukewarm, as well. Just 12 of the 27 covering CMG consider it a "strong buy," compared to 15 "hold" ratings. Meanwhile, the consensus 12-month price target of $134.89 is a slight discount to current levels. This could set the stock up for even more price-target hikes from analysts, should tomorrow's earnings event go well. 

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