Chipotle Stock Outlook (CMG): Market Cycles Say Buy This Dip

Steve Miller

Chipotle Mexican Grill (NYSE:CMG) dropped 2% lower on Tuesday morning, after a Mizuho analyst downgraded the stock from neutral to underperform.

Having rallied 80% since Chipotle’s board hired CEO Brian Niccol, Mizuho Financial has advised its customers to manage exposure to the stock.

Niccol ran competitor Taco Bell and gained a reputation for good results with regards to menu development and digital innovation.

However, Mizuho analyst Jeremy Scott opines that, “While it is our view that Niccol is the best choice to lead Chipotle from here, in the absence of clear catalysts that can justify significant earnings upside, we’re compelled to recommend investors reduce their risk.”

Scheduled to report earnings after the market closes on July 26, Scott expects Chipotle to post earnings per share of $2.83, which is above the consensus estimate of $2.80. For the previous quarter, they recorded profits of $2.13, burning the average estimate of $1.57.

After analyzing the CMG weekly chart, we are inclined to disagree with Scott’s downgrade. Looking at the market cycles, we can see that the stock rallied strong during the last cycle, before declining only modestly as the cycle ended.

CMG has since bounced from our buy zone and rallied with strong velocity. Given its positively configured cycles, we expect for the stock to rally to a higher high compared to the previous cycle.

Our price projection is near $500, which represents major cycle peak resistance.

Chipotle Mexican Grill (CMG) Stock Chart with Weekly Bars

chipotle stock research outlook july 10 bullish buy cmg

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Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.