Chipotle could reach $1,000 a share after earnings, says chart analyst

on Oct21
by | Comments Off on Chipotle could reach $1,000 a share after earnings, says chart analyst |

It might be time to take a bite out of Chipotle.

Charts of the fast-casual restaurant chain’s stock show Chipotle consolidating above a key area of support, and if that holds, it could be a straight shot to $1,000 per share, says Bill Baruch, founder and president of commodity trading firm Blue Line Futures.

Chipotle is expected to issue its third-quarter earnings report on Tuesday, heading off one of the busiest weeks of earnings season, in which nearly half of the companies in the Dow Jones Industrial Average and a quarter of the S&P 500 will report their results.

Chipotle hit an all-time high after its second-quarter report.

“Chipotle’s been on a tear here for the last couple years,” Baruch said Friday on CNBC’s “Trading Nation.” “We’ve been consolidating very very well out above those 2015 highs [in the $]750, 760 area. As long as that holds, I’m buying dips in Chipotle, and I think we could see a move to about $940 to 1,000 on the next leg higher.”

A climb to $1,000 per share would represent a nearly 19% rise from Friday’s closing price of $841.48. The stock got a 1.5% boost in Friday’s trading session after Bank of America analysts upgraded the stock to neutral.

Baruch also liked the post-earnings prospects for Twitter, which is scheduled to report its quarterly results Thursday.

“Where I think there’s actually some really good value in buying is Twitter [which] has almost fallen about 20% from its peak this year,” Baruch said, pointing to a chart of the stock.

“I think there’s a lot of technical support,” he said. “You had a breakout above a trend line from its record high and that provided a lot of momentum. But now that we’ve pulled back, you have that breakout of that trend line now bringing support. You have another trend line coming in from its lows bringing support.”

The convergence of those two lines — and Twitter’s 200-day moving average — provide a “strong” floor for the stock between $36 and $38, the technical expert said.

“I like Twitter into that pocket short term, intermediate term and long term as a buying opportunity there,” he said.

Steve Chiavarone, an equity strategist, vice president and portfolio manager at Federated, is also feeling bullish going into the earnings deluge.

“The much-anticipated earnings recession looks like it may get pushed off yet again,” he said in the same “Trading Nation” interview.

All year, “the market was looking for negative year-over-year earnings growth,” Chiavarone said. “We snuck out positive growth in the last two quarters, and we’re on pace to do so again — albeit early in the season — in Q3.”

With roughly 20% of companies scheduled to report this season already out with their results, a path higher for stocks could be in the cards, the strategist said.

“We’re beating [earnings estimates] by around 5%. We’re on pace to actually have year-over-year growth of a half a percent to 1%. That’s good news for the bulls,” he said. “We’re beating across sectors, with the exception of energy, and we think the setup so far in the early going here looks pretty good.”

And while 2020 forecasts are likely to soften as the end of this year approaches, some of the market’s most pressing geopolitical concerns could soon fade, Chiavarone said.

“Trade looks like it’s at least less bad, Brexit looks like we’re coming to some kind of resolution, possibly, and the early returns on the earnings season so far here look pretty good,” he said. “All of those increase your confidence that maybe those estimates come down at a more modest pace. If that’s the case, then we think this market can move materially higher between now and the end of next year.”

Disclosure: Federated owns shares of Twitter.


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