Insider buying activity isn’t the be-all and end-all. Yet, it’s certainly notable when an insider takes a huge stake in their company. You’ll definitely want to learn more about the big insider purchase of Chipotle Mexican Grill (NYSE:CMG) stock — and then discover why this particular restaurant chain is worth investing in.
Furthermore, you might be surprised to see how Chipotle stock performed last year in spite of the company’s price hikes. It just goes to show that America’s hunger for Chipotle’s burritos hasn’t waned, even with the impact of inflation.
Who gobbled up $18M worth of CMG stock?
Chipotle has some big-money investors, including Pershing Square Capital Management founder and CEO Bill Ackman. It certainly speaks volumes that Ackman, a legendary portfolio manager, recently held shares of Chipotle stock.
That’s encouraging and so is the insider share purchase made by Chipotle Director Gregg Engles. Reportedly, Engles purchased 800 Chipotle shares in December for a whopping $1.8 million. Evidently, it’s a family affair since Engles’ wife, Molly Engles, bought 77 shares of CMG stock for $176,000.
Clearly, the Engles family believes in the future of Chipotle. I can’t blame them, as the fast-casual dining chain seems to be doing well despite raising its product prices by 3% last year. It wouldn’t surprise me if the company end up enacting one or more price hikes in 2024.
By now, many people are accustomed to these price increases, even if they don’t like them. Besides, Chipotle proved that it can succeed in a high-inflation environment. Impressively, the restaurant operator grew its revenue 11% year over year in the third quarter while also increasing its adjusted earnings by 19.5%.
Chipotle caters to young customers
After zooming from $1,400 to $2,200 last year, CMG stock has plenty of momentum, but it isn’t cheap. Yet, the stock can continue to gain value in the coming quarters and years because Chipotle strongly appeals to young customers.
That’s the idea behind the bullish thesis from TD Cowen analyst Andrew Charles, who published an Outperform rating on Chipotle stock not long ago. Charles observed younger consumers such as Millennial and Generation-Z consumers seeking greater transparency regarding where their food comes from.
Chipotle emphasizes this type of transparency, and Charles connected the dots between younger consumers’ preferences and Chipotle’s potential to capitalize on this:
“As millennials and Gen Z enter their prime years of purchasing power, we note that younger consumers are 6.6 percentage points more likely to view food transparency (aka ‘what’s in my food?’) as important or very important in making a restaurant decision.”
Young customers already have considerable purchasing power, which is bound to grow even more in the coming years. Hence, forward-looking investors might consider buying CMG stock — even if they currently view it as expensive.
CMG stock isn’t cheap, by any means, but it can grow as long as customers are willing to tolerate Chipotle’s price hikes. Moreover, for momentum-focused traders, CMG stock looks like the perfect restaurant stock pick for 2024.
Chipotle stock rallied sharply in late 2023 on the back of the company’s excellent third-quarter results. This year, investors should be realistic in their expectations. Even if CMG shares do half as well in 2024 as they did last year, that would still be quite impressive.
In addition, Chipotle has a long-term opportunity to capitalize on Millennial and Generation-Z trends. After the onset of the COVID-19 pandemic, young people had to consider their lifestyle choices. They demanded transparency and sustainability in their products, including the food they consume. Chipotle has catered to the demands of these young consumers, whose collective wealth will increase in the coming years.
Here’s some other good news if you’re not a billionaire. You don’t have to be a big-money investor like Ackman or Engles to take a stake in Chipotle’s future growth. It’s perfectly fine to own just one share of Chipotle stock, or feel free to buy more than one share if you can afford it.
After all, Chipotle should continue to succeed as a business, even if it has to raise its food prices again. Thus, you shouldn’t hesitate to take a small bite of CMG stock and prepare for tasty long-term returns.
Disclaimer: All investments involve risk. In no way should this article be taken as investment advice or constitute responsibility for investment gains or losses. The information in this report should not be relied upon for investment decisions. All investors must conduct their own due diligence and consult their own investment advisors in making trading decisions.
