Our Equity Analytics department is always updating price targets and ratings on companies that we have coverage on based on new information. Our price targets and ratings are thoroughly researched and use financial analysis tools to determine stock prices. Today, we are updating the following companies from our coverage - AmBev (ABV), Buffalo Wild Wings (BWLD), Chipotle Mexican Grill (CMG), FMC (FMC).
The chart below shows new ratings, price targets, and buy/sell ranges versus old ones:
ABV - Downgrade from Hold to Sell, Increase PT from $32 to $33
We downgraded AmBev from Hold to Sell, and we upped the price target from $32 to $33. The company has made quite a move over the past few months, and we see that move is too much. At this point, AmBev is a bit overvalued. We do see some upside for the company in its profitability margins and growth levels, but we do not believe that at this point it is fairly valued. The company's 27 PE ratio is quite high for a beverage company with about 6% growth in the next two years in revenue. Even its forward PE is over 21. We believe that ABV has priced in all growth for the next two years, and we would wait for a dip before buying. We do like the company fundamentally, but the value is not there right now.
BWLD - Downgrade from Hold to Sell, Increase PT from $60 to $77
Buffalo Wild Wings is also getting quite ahead of itself right now. We believe that the company is a solid growth company with great fundamentals, and we have given the company some of the best parameters moving forward. We have a very low discount rate due to their high growth rate and no debt. The company, however, is way too overvalued at this point. It is a high-growth stock, which can explain its overvaluation. The problem, though, is that BWLD is pricing at a 30+ PE ratio right now. The company seems to have priced in a lot of growth, and we believe that the company is not pricing in any concern of profit margins being decreased.
CMG - Maintain at Hold, Increase PT from $391 to $445
The difference between CMG and BWLD is not in the growth of the two. Rather, we believe that CMG offers a better opportunity for investors due to its higher economic moat. The company has created a really significant economic moat that has led it to operate at a higher profitability level. The company continues to improve profitability, and they have not seen significant margin squeeze. The great sign of an economic moat is when rising costs can be passed onto their consumer, and that appears to be the case with Chipotle. The company continues to have great growth mixed with growing margins. We discounted CMG at even better rate than BWLD as we continue to believe it will be low-debt, high-growth, growing profitability for the next five years. We do believe the company is pricing in the VERY best-case scenario right now, so keep that in mind. Much more growth past $450 is about the top of where we can imagine this one going.
FMC - Downgrade from Buy to Hold, Decrease PT from $94.50 to $85
We did not adjust our PT as the company's earnings came in as expected. We did not change our rating as the company appears still to be fair valued. It has grown in valuation a lot and is nearing the top of our range. FMC is a top-notch chemicals company with solid economic moat, and if they can improve margins, we would increase our valuations.