By Tonya Garcia, MarketWatch
Chipotle Mexican Grill Inc. shares had a blockbuster year, up 93% over the last 12 months, and SunTrust Robinson Humphrey analysts think menu enhancements will be key to maintaining the momentum heading into 2020.
Chipotle’s stock rally far outpaced the 29.4% gain for the S&P 500 index /zigman2/quotes/210599714/realtime SPX -3.35% and the 23.2% gain for the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -3.56% .
Chipotle /zigman2/quotes/200781108/composite CMG -3.82% is expected to relaunch its “Lifestyle Bowls” in the new year, as well add other items to the menu. Chipotle’s first “Lifestyle Bowls” launch was on Jan. 2, 2019, and company executives say they were a hit. The bowls focus on popular diet regimens like paleo and keto. Chipotle’s marketing at the launch of the items focused on health-and-wellness New Year’s resolutions.
“Our guess is that the new ‘Lifestyle Bowls’ will be promoted and offered online exclusively, but we believe employees have been trained to better handle in-store orders, which could open the door to in-store marketing of the bowls,” analysts said.
Chipotle has already announced a new Supergreens salad blend that includes baby kale and baby spinach, which will replace the romaine-only salad it had been using. The new Supergreens will be included in items like the keto and paleo Lifestyle Bowls.
And Chipotle has made the grilled Adobo chicken compliant with the Whole30 diet by switching the oil in the marinade.
Chipotle is offering free delivery for the month of January when customers order a pre-configured Lifestyle Bowl on the app or website.
“We do not expect the new salad mix and ‘Lifestyle Bowls’ to be as incremental as they were when first launched, or as carne asada has been, but we are encouraged by this early sign of continued menu innovation in ’20,” analysts said.
SunTrust rates Chipotle stock buy with a $900 price target.
KeyBanc Capital Markets analysts led by Eric Gonzalez are also bullish about Chipotle, as well as Starbucks Corp. /zigman2/quotes/207508890/composite SBUX -3.25% “based on sales momentum, digital technology, marketing and P&L efficiencies, which should provide double-digit earnings-per-share growth at Starbucks and earnings-per-share upside at Chipotle.”
KeyBanc rates both Chipotle and Starbucks stock overweight. Analysts have a $900 price target on Chipotle and $105 on Starbucks.
KeyBanc analysts also rate McDonald’s Corp. /zigman2/quotes/203508018/composite MCD -1.09% and Burger King parent Restaurant Brands International Inc. /zigman2/quotes/202094900/composite QSR -2.37% overweight, but expect same-store sales at fast-food chains to slow to 2% growth due to the competition in the category.
“In addition to the much-hyped rollout of Wendy’s breakfast and chicken/plant-based protein innovations, we see volatility coming from the election cycle and additional competitive pressure from large private chains including Chick-fil-A, Subway, Hardee’s/Carl’s Jr. and Little Caesars,” analysts said.
Wendy’s Co. is investing $20 million in the latest breakfast launch and expects the new menu to drive at least 10% of sales.
And in the casual dining category, KeyBanc favors Olive Garden parent Darden Restaurants Inc. /zigman2/quotes/200092615/composite DRI -2.65% , which analysts say has scale, management team, R&D capabilities and consumer insights all working in its favor.
Across the restaurant category, analysts think customers will continue to pay more for innovative products, like Burger King’s plant-based Beyond Whopper made with the Beyond Meat Inc. /zigman2/quotes/211617595/composite BYND -2.97% burger and the carne asada at Chipotle.