Chipotle Mexican Grill Inc CMG:NYSE

Chipotle Mexican Grill (CMG) is on track to beat same store sales expectations for the first quarter amid a return to dine-in and ongoing digital strength, analysts at Wedbush Securities said Friday.

First-quarter checks point to sustained comparable sales strength after the company said in February that quarter-to-date comparable sales were increasing in the low-double digit range, Wedbush analysts including Nick Setyan said in a note. Chipotle forecast that first-quarter comparable restaurant sales would grow by a high-single digit.

"Responses pointed to improved staffing, the return of dine-in, and sustained digital strength," the analysts wrote, reiterating an outperform rating and $2,080 price target on the stock. "The latter seemed to have experienced a boost from the Fajita Quesadilla introduction in early March following the 'hack' going viral on TikTok."

The brokerage expects the launch of the Chicken al Pastor menu item this week to further sustain comparable sales momentum through the end of the first quarter and into the second quarter. The analysts maintained their first-quarter comparable sales growth target of 8.5%, which is above the consensus estimate of 8.3%, according to the report. Wedbush continues to expect full-year same-store sales growth of 5.8%, at least for now.

The company is scheduled to report first-quarter results on April 25.

"While we choose to forego more aggressive comp estimates for now, given the strength of our checks, we believe upward revisions post (first quarter) are probable," Setyan wrote. "Continued menu innovation, throughput efficiencies, marketing spend growth, and the maturation curve of new units remain ongoing (same store sales) growth drivers."

The brokerage lowered its first- and second-quarter per-share earnings targets to $8.96 and $11.78, though they're still above the Capital IQ average analyst normalized estimates of $8.87 and $11.50, respectively. The company's margin outlook is better than it has been for some time, they said.

"We see little near-term risk versus management guidance and consensus," the analysts wrote.

Beyond the first quarter, Wedbush isn't anticipating incremental price increases in 2023, which the analysts said should help Chipotle recapture its historical relative value proposition compared with peers.

Price: 1609.24, Change: -15.91, Percent Change: -0.98