Chipotle Mexican Grill, a name now echoing through the halls of commerce, began its ascent two decades ago, a modest seedling in the vast field of fast-casual dining. It bloomed, as such things often do, from a mere $0.44 a share in those early days of 2006 to the present valuation of approximately $41. A considerable journey, one might observe, though not, perhaps, entirely unforeseen. The company expanded, naturally, as all things given sufficient nourishment will do; from 220 million in revenue to a present 11.3 billion, its footprint spreading across the land with a network of 3,726 establishments. It cultivated a certain…distinctiveness, a brand identity that appealed to the sensibilities of a younger generation, a calculated boldness in its marketing, and a streamlining of its offerings that spoke to the modern appetite.
Yet, the market, as it always does, has begun to murmur its discontent. Over the past year, the stock has retreated, a subtle decline of some 26%, fueled by anxieties regarding slowing sales, diminishing margins, and a cautious outlook. It is in such moments, when the exuberance fades and a quiet apprehension descends, that the discerning investor might find opportunity. The present dip, I believe, is not a harbinger of decline, but rather a temporary obscuring of a fundamentally sound enterprise.
A year prior, I posited that Chipotle represented a solid investment, buoyed by rising comparable sales and expanding operating margins. The departure of its former Chief Executive, Brian Niccol, did not unduly trouble me; his successor, Scott Boatwright, having served as Chief Operating Officer throughout Niccol’s tenure, possessed a thorough understanding of the enterprise. However, the currents shifted. Comparable sales faltered in the first half of 2025, and operating margins contracted. The explanations offered – inflation driving up costs, increased competition, and a tightening of purse strings amongst younger patrons – were, while plausible, did little to assuage the growing unease.
| Metric | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 |
|---|---|---|---|---|---|
| Comparable Sales Growth | 6% | 5.4% | (0.4%) | (4%) | 0.3% |
| Restaurant Level Operating Margin | 25.5% | 24.8% | 26.2% | 27.4% | 24.5% |
| Total Company-Owned Stores | 3,615 | 3,726 | 3,781 | 3,839 | 3,916 |
Yet, even amidst this lull, Chipotle continued to expand its network of establishments, adding new locations to its portfolio. Comparable sales did, indeed, show a modest resurgence in the third quarter of 2025. However, the company anticipates a further dip in the fourth quarter, constrained by its inability to perpetually raise prices in the face of persistent inflation. For the full year, a slight decline in comparable sales is projected, though the company remains committed to opening between 315 and 345 new stores.
Looking ahead to 2026, Chipotle plans to add another 350 to 370 locations, many equipped with drive-thru “Chipotlanes” to expedite service. Inflation is expected to continue to exert pressure on operating margins, though comparable sales may stabilize as the macroeconomic climate improves. Mr. Boatwright has hinted at a “new strategy” for 2026, one intended to restore mid-single-digit growth. The details remain shrouded in a certain…reserve, but analysts predict a 10% increase in revenue and a 7% rise in earnings per share.
For 2027, projections call for an 11% increase in revenue and an 18% surge in earnings per share. Such forecasts, of course, are subject to the whims of the market, but it is worth recalling that Chipotle has weathered similar storms before, from 2015 to 2017. That earlier period of stagnation stemmed from internal issues, rather than the broader macroeconomic headwinds it currently faces. A swift recovery, therefore, seems not improbable, provided inflation cools and the new growth strategies bear fruit.
At its current valuation of $41, Chipotle may not appear inexpensive, trading at 34 times this year’s earnings. However, it retains considerable potential for growth, through the opening of new stores, expansion into overseas markets, and enhancements to its digital platform and loyalty program. If one believes, as I do, that Chipotle will overcome its present difficulties – as it did under Mr. Niccol’s leadership – then the present moment offers a propitious opportunity to accumulate shares, while others look elsewhere.
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2026-01-23 04:13