Following the 17% pullback in the shares of better-for-you, quick service Chipotle Mexican Grill (CMG) over the last several weeks, we are adding them to the AAP Bullpen. We've long been fans of the company's business, as well as the shares, and we see the current Omicron market volatility likely setting us another bite at the burrito so to speak.
During the height of the pandemic, Chipotle flexed its digital footprint that spans mobile ordering, as well as delivery through partners such as Grubhub (GRUB) , Uber's (UBER) Uber Eats and Door Dash (DASH) and others. We see this being augmented by the company's "Chipotlanes" that combine mobile ordering with drive-thru, and we recognize how critical drive-thru was for companies like Starbucks (SBUX) and McDonalds (MCD) during the pandemic. We see Chipotlanes taking a page out of Amazon's (AMZN) playbook by helping eliminate friction from the transaction. When Chipotle reported its September-quarter results, it shared it is on track to open more than 200 new locations this year, 75% of which will have Chipotlanes
As vaccination levels have risen in the U.S., so too have the lines at the company's locations, which has also been spurred on by the smart usage of limited-time menu offerings such as carne asada, cauliflower rice and more recently smoked brisket. Again, we've seen success with this strategy at Starbucks and McDonald's, and Chipotle is testing other offerings including plant-based chorizo that it could use to stay on course with a regular cadence of limited time menu offerings. In our opinion, the adoption of plant based proteins would likely help expand the company's customer base, not a bad move in our view.
We see upside in CMG shares to $2,000, which offers 25% upside from the current share price. From a technical perspective, we are watching the $1,550-$1,575 support levels near-term as we and the market continue to digest the latest omicron news.