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Chipotle: Fully Valued Heading Into Q3 Earnings NYSE:CMG

They rarely distribute dividends to shareholders, opting for reinvestment in their businesses. More value-oriented stocks tend to represent financial services, utilities, and energy stocks. However, the price hikes don’t appear to have diminished customers’ appetite for Chipotle’s burritos, bowls and other Mexican-inspired offerings.

These factors could affect its ability to meet Q3 earnings per share estimates of ~$10.70 unless it leans on share repurchases to improve its per share growth. Zacks provides the average brokerage recommendation (ABR) for thousands of stocks for most of the leading investment web sties. The ABR is the calculated average of the actual recommendations (strong buy, hold, sell etc) made by the brokerage firms for a given stock. Chipotle has serving up several price hikes over the last few years.

  • Simultaneously, it was benefiting from mid-single-digit menu pricing to help combat higher beef prices and lower avocado prices.
  • Style is an investment factor that has a meaningful impact on investment risk and returns.
  • The new restaurant, for pickup and delivery orders only, is called Chipotle Digital Kitchen.
  • She didn’t detail which menu items would be affected and didn’t respond to follow-up questions.
  • Hence, if we were to see the stock rally near the top of its range on a surprise beat in Q3 and vault back above $1,950 before year-end, I would view this as an opportunity to book more profits.
  • Chipotle’s stock has risen 30% this year, giving it a market value of $50.1 billion.

But the total appreciation from the 22 IPO price to the 2015 high? More locations followed and, in 1998, McDonald’s (MCD) took a minority stake in Chipotle. Soon, the world’s biggest burger chain became the burrito chain’s biggest investor, which allowed Chipotle to expand from 14 locations in 1998 to over 500 by 2005. And Chipotle lovers sounded off in the comment section of a viral TikTok on “the downfall of Chipotle” in July. They recalled a time when their chicken burrito bowl only cost $7.99 — and longed for a taste of a Chipotle burrito from 2011. Faced with the reality of everything costing more, it may be that Tex-Mex fans are willing to pay a little extra for the luxury of a burrito with some queso and guac on the side for the time being.

Chipotle Mexican Grill Inc. hosts conference call for investors

Founder Steve Ells opened the first location in Denver with money borrowed from his father. The custom burrito concept proved popular, with the restaurant selling more than 1,000 burritos a day after just one month. The price increases come as other chains, like Shake Shack and Taco Bell, have raised their prices over the past two years. Months before that, in the first quarter of 2022, Chipotle raised its prices by 4%. That was on top of another increase in June 2021, which the company said was to offset the cost of paying Chipotle employees more.

The chain’s last price increase came in August 2022 when some customers began paying $1 or more additional for the same menu items as before. Before this, Chipotle increased prices about 3.5 to 4% in June of 2021, citing a raise in employee wages, and then again in the first quarter of 2022, also around 4%. After the close Oct. 21, Chipotle reported Q3 EPS of $3.76, a 1.6% slip from the same year-ago quarter. Revenue rose 14.1% to $1.6 billion, edging past views for $1.59 billion.

Finally, regarding development, the company opened 47 new restaurants in the period (including 40 Chipotlanes), with its Chipotlanes continuing to outperform, and not surprisingly, Chipotle continues to aim for ~80% of new restaurants in this new format. Meanwhile, from a top-line standpoint, sales estimates are sitting at ~$2.48 billion for its upcoming Q3 results, implying a ~12% increase in sales year-over-year. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors.

Stock , CMG

In August 2022, Chipotle raised the prices of its entrees by more than $1 for some customers. That increase followed a previous increase earlier that same year. Before that, the company had also bumped up its prices in June 2021, a move it attributed to a hike in hourly wages for employees to $15 an hour. Chipotle hiked its prices again in December 2021 by 4%, bringing the cost of menu offerings that year up 10% higher than they were in 2020. On the downside, it would take a lot to become interested in Chipotle, given that I am looking for a minimum 20% discount to fair value for large-cap growth stocks to ensure a margin of safety. And if we measure from a more conservative fair value estimate off $1,730, Chipotle’s ideal buy zone wouldn’t come in until $1,385, significantly below current levels and in line with where the stock bottomed in mid-2022.

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Please remember that OTC-BB stocks are not allowed in the game. Investors can’t forget about the company that’s been long dominating the fast-casual category. We’d like to share more about how we work and what drives our day-to-day business. Compare CMG’s historical performance against its industry peers and the overall market. In light of escalating living costs and a complex economic backdrop in the U.S., a recent survey delved into the financial dispositions and actions of Gen Zer individuals.

Chipotle Mexican Grill: A Promising Investment Due to Solid Performance and Growth Potential

Inflation rose by 3.7% in August compared to last year’s figures for the same month, the US Bureau of Labor Statistics said. The next read on consumer prices comes on Thursday — and economists are expecting another steep rise from last year’s figures. The chain is raising prices, it confirmed to Insider on Tuesday. But it remains to be seen exactly which menu items will come with a higher price tag. While dowmarkets forex broker inflation is finally moving in a better direction, consumer prices this month still rose overall 3.7% from earlier years after hitting a 40-year high of 9.1% in June 2022. Chipotle Mexican Grill currently has an average brokerage recommendation (ABR) of 1.64 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 28 brokerage firms.

A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations. If we multiply this figure by FY2024 earnings estimates of $52.50, Chipotle’s fair value comes in at $1,730 per share (18-month price target).

The current ABR compares to an ABR of 1.64 a month ago based on 28 recommendations. Style is an investment factor that has a meaningful impact the white coat investor on investment risk and returns. Style is calculated by combining value and growth scores, which are first individually calculated.

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A fast-casual restaurant chain, Chipotle Mexican Grill focuses on fresh and organic ingredients, tempting diners with gigantic burritos, salads, and more. For more ideas on the best stocks to buy or watch, investors can check IBD stock lists and other IBD content. An A SMR Rating (Sales + Profit margins + Return on equity) places Chipotle in the top 20% of all stocks based on those gauges. ROE of 25.5% was also the best in at least nine years — and meets the 17% minimum of most leading growth stocks. Digital sales surged 202.5% and accounted for 48.8% of overall Q2 sales.

That proved helpful as U.S. states ordered people to stay indoors and only get takeout or delivery. But higher delivery and food costs ate into margins, sending the stock lower after hours. Profit growth slowed to 7%, to $15.10 a share in 2015, ending a 10-year streak of double-digit or higher gains. It recovered nicely the next three years, to $14.05 a share in 2019. “The [Chipotle] brand is very strong and the value proposition is very strong, and we have that pricing power to use,” Niccol told investors during the call. Your favorite Tex-Mex fast casual spot may no longer be much of a bargain compared to a sit-down restaurant meal.

So, while there’s no question that Chipotle is one of the better names to purchase on corrections for investors looking for growth in the Retail/Restaurant space, it’s hard to argue that it’s anywhere near the best value here, even if the sector is down substantially from its highs. Moving over to industry-wide trends, one positive for the industry has been the cool down in commodity inflation, fusion markets review with several restaurant brands actually expecting commodity deflation in the back half of the year in some areas of their market basket. Despite apparently rising costs, Chipotle’s 2023 second quarter report saw a 13.6% increase in revenue year over year, bringing the overall number to $2.5 billion. The eatery also opened 47 new restaurants with 40 locations including a Chipotlane drive thru.