You better be reaching a little deeper into your wallet if you want extra guac on that burrito bowl. Chipotle (NYSE:CMG) is charging extra now as the company prepares to make a major infrastructure upgrade. And while the Chipotle price hike might be irritating consumers at the counter when they’re ordering, it’s exciting analysts who think CMG stock is bound for higher prices.
Back in early May, Chipotle announced a wage hike for its employees. As a result, workers will now receive average wages of $15 per hour. The wage increase is set to take effect by the end of this month. The company is also in the process of accommodating 20,000 new hires.
To achieve this goal, the burrito franchise is having to up its prices. Chipotle is seeing price hikes of around 4% on its menu items.
Chipotle CFO Jack Hartung says the move to increases wages, and therefore to up prices, is a crucial one. “The industry is now going to have to either do something similar [to the wage increase] or play some kind of catch-up,” he says, adding that companies who don’t increase wages will suffer further troubles in hiring new employees and keeping current ones.
Chipotle Price Hikes Good for Employees, Better for Shareholders
The price hike is making analysts very bullish on the burrito chain. This morning, Raymond James analyst Brian Vaccaro upgraded his rating for CMG stock to a “strong buy.” Vaccaro says that the increase will allow the franchise to deliver greater earnings per share than estimates are predicting. He also says the company has a strong value proposition even with the wage increase. Vaccaro is ultimately pegging CMG stock for an $1,800 price point in response to the news.
Vaccaro is not alone in his bullish attitudes, either. Yahoo Finance anchor Brian Sozzi is also calling the price hikes good for CMG stock. Sozzi reported that several analysts are upping their price targets to reflect prospective multi-hundred-dollar gains. Piper Sandler analyst Nicole Miller Regan is setting a price target as high as $2,100 for CMG stock, calling it her top stock of the year.
CMG stock is up 2.5% today as bullish predictions trickle in.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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