Chipotle's stock is having its best quarter ever—here's how to play it

Chipotle's stock is sizzling.

Shares of the fast-casual chain are on pace for their best quarter ever, up about 60 percent year to date and some 80 percent from the December lows.

On Tuesday, the stock reached its highest level since 2015.

Given the surge, market watchers tell CNBC it's not yet time for investors to take advantage of Chipotle's red-hot rally.

Erin Gibbs, research analyst at S&P Global Market Intelligence, said Tuesday that while the company's double-digit profit growth, expansion plans and mobile-ordering boost are generally promising, the stock has run too much for her taste.

"It's a little pricey at this point," she told CNBC's "Trading Nation." "Its valuations are very extended, and ... if they don't beat these really high expectations, if they don't hit every single number, I'm worried about the negative part and [expectations] coming down. And we already know from last year [that] health concerns, data breach, anything can send this stock plummeting. So I'd like to see an entry point closer to about $615. That would make me feel more comfortable."

Frank Cappelleri, chief market technician at Instinet, was also somewhat cautious, telling CNBC in the same segment that the stock has looked "extended" since mid-January.

Cappelleri noted that if Chipotle's stock can break out of its current inverse head-and-shoulders pattern, it could rally into the $700s. But with the current reading on its relative strength index, which tracks buying and selling pressure, he said he'd also advise investors to wait for a better entry point.

"The RSI is at 86, and that is the second-highest level we've seen in its entire history," he said. A reading over 70 indicates that a security is overbought.

"At this point, the stock has done nothing wrong except go up," Cappelleri said. "I think it pauses, and we take advantage of that and buy it on weakness."

Shares of Chipotle made a new 52-week high of $692.75 a share on Tuesday, closing slightly lower at $688.82. They were up 1.7 percent in Wednesday's premarket. Shares are up nearly 110 percent in the last 12 months.

Disclaimer

Hold Star Cement; target of Rs 110: ICICI Direct

ICICI Direct's research report on Star Cement

We recently met the management of Star Cement. The key takeaways are: -i) Siliguri 2 MT grinding unit expansion is on track and is expected to be commissioned in H2FY20E. This plant will mainly serve the North Bengal and Eastern Bihar markets, which currently have annual demand of ~5.5-6 MT demand and are growing at healthy pace, ii) in the North East region, incremental demand will mainly be served by Dalmia and Star Cement as other players are already operating at higher utilisation, iii) currently cement prices in Guwahati are at around Rs 390/bag; limited scope for price increase because prices above Rs 415-420 levels, will attract supply from eastern region players, currently 10-12% of volumes come from these players, iv) due to supply shortage, prices of clinker in the north east region have shot up from Rs 3000 per tonne earlier to Rs4000-4500 per tonne, v) prices in West Bengal are facing headwinds due to incremental supply coming from the ramp-up of acquired plants of Century Textiles by UltraTech Cement.

Outlook

In the near term, cessation of transport subsidy, higher power cost and other expenses would keep margins under pressure. Hence, we maintain HOLD rating with a revised target price of Rs 110 (i.e. 8.5x FY20E EV/EBITDA).

For all recommendations report, click here

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Read More First Published on Mar 22, 2019 03:17 pm