Chipotle Mexican Grill shares slipped today despite a significant price increase from analysts at Wedbush. As of this writing, the stock was down 3.81% at $692.55 per share. They remain Neutral-rated on the fast casual chain despite their price target increase.

Chipotle Mexican Grill target to $740

In a report dated Aug. 24, analysts Nick Setyan and Colin Radke said they raised their price target for Chipotle from $620 to $740 per share. They remain Neutral on the stock because they want to see more signs that the company’s transaction growth rate is sustainable. Shares plunged last month after a disappointing earnings report.

Their checks do suggest that 10% of comparable base units suggest that the fast casual chain’s same store sales growth has reaccelerated so far in the third quarter, possibly surpassing the consensus estimate of 2.5%. The Wedbush team is estimating a trend of 4% to 5% through the middle of this month.

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What’s driving Chipotle’s sales growth?

They said the main drivers of growth this quarter have been a buy one, get one coupon that was distributed widely and also an online promotion. So far this quarter, management’s commentary on same store sales growth in July suggested slightly positive growth in transactions and comparables.

The Wedbush team expects same store sales to “moderate” in the second half of the third quarter as the impact from the coupon and online promo comes to an end. However, they raised their comparable store sales growth rate from 2.5% to 3.5%.

Where will future growth come from?

They see no clear driver of future sales growth at Chipotle Mexican Grill in the medium term. In the third quarter, they’re expecting a menu price increase of 0.6%, and in the fourth quarter, they expect a 1.5% increase. They noted that during the second quarter, the company saw about a 200 basis point headwind due to the carnitas that are on its menu. Pork is expected to return to the company’s system-wide menu early in the fourth quarter.

The analysts think catering will be able to contribute more than 30 basis points of growth to the mix.

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Other areas of potential growth include marketing efforts and better through-put. However, they don’t see any upside to estimates.

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Chipotle Mexican Grill can still grow units

They also see the potential for Chipotle Mexican Grill to grow its units, even without penetrating further into Colorado. Assuming Colorado’s penetration rate throughout the U.S., they see an opportunity of 4,400, plus another 1,000 units from the U.K. and Canada.  As a result, they expect the fast casual chain to continue its double-digit growth rate over the next 10 years or possibly more.

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The Wedbush team upped their earnings per share estimate for this year from $17.34 to $17.42 per share as a result of higher than expected same store sales growth in the U.S.

All graphs/ charts in this article are courtesy Wedbush.