Chipotle Gaining Market Share At McDonald's Expense?

Even as the Chipotle Mexican Grill (NYSE: CMG) grew same-store sales 17.3 percent in the recent quarter, McDonald's (NYSE: MCD) fell as much as three percent.

Chipotle's gains "point to a longer-term trend of fast casual chains like Chipotle and Panera Bread Co. growing market share at a much faster pace than casual dining restaurants," Millar Tabak's Stephen Anderson said in a note.

Anderson rates Chipotle at Hold, citing valuation.

Still, Anderson said the chain should see same-store sales growth of 15 percent in the current quarter. Newer or yet-to-be introduced formats like mall-based or drive-thru stores will comprise an increasing part of the company's growth.

U.S. market saturation shouldn't be a worry until 2021 "at the earliest," while an expected decline in food prices should serve to widen Chipotle's gross margin, according to Anderson.

Sustained traffic growth and an increasing share of catering services will help drive a 30 percent earnings growth in the next few quarters, Anderson said.

Although Anderson called the recent second quarter "the high water mark" for food prices, Zacks Investment Research said it's food prices that keep the firm at Neutral on the sidelines.

Higher beef, cheese and avocado costs caused total food costs to rise to 34.6 percent of revenue, from about 33 percent in the recent period.

Zacks, which doesn't identify its analysts, said Chipotle thinks food prices will continue to increase in 2014, in part because of a drought in California.

Chipotle shares rose 10 percent after-hours Tuesday after handily beating Wall Street's expectations. Chipotle was flat Wednesday at $661.59.