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6 hours ago
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Is Chipotle Stock a Buy After Its Second-Quarter Earnings?
Key Points Revenue and earnings growth has slowed dramatically amid rising competition and a sluggish economy. As growth slows, investors may question the premium valuation Chipotle has commanded historically. Chipotle's prospects for long-term expansion continue to appear promising. 10 stocks we like better than Chipotle Mexican Grill › Chipotle Mexican Grill (NYSE: CMG) failed to unwrap a strong earnings report when it released its earnings for the second quarter of 2025. The burrito giant experienced a dramatic slowdown in growth, a concerning sign as it has historically commanded a premium valuation. This situation leaves investors in a difficult position. Former CEO Brian Niccol left the company last year to join Starbucks. Although its previous COO, Scott Boatwright, has run the company since then, the verdict is likely still out on his tenure. Chipotle continues to grow as it adds locations, so long-term shareholders have no apparent reason to sell their shares. The question is whether investors should add shares, or is it best for them to stay on the sidelines? Chipotle's Q2 results In the second quarter of 2025, Chipotle generated $3.1 billion, representing a 3% year-over-year increase. That included a 4% decrease in comparable restaurant sales. Hence, revenue grew only because Chipotle added 309 restaurants over the last year, taking the count to 3,839 as of June 30. Unfortunately, these results stand in contrast to Q2 2024, when revenue grew by 18%. The company attributed the decline to negative consumer sentiment and rising competition. In Q2 2025, net income was $436 million, decreasing by about 4% annually. Increases in operating costs, particularly labor, occupancy, and other expenses, weighed on profit growth. Moreover, while investors expected the slowdown, its revenue numbers fell short of estimates. That may partially explain why the stock fell 13% after the release. It has also fallen by one-third since reaching its all-time high in June of last year. Why investors should be concerned Admittedly, even the best growth stocks experience significant retrenchments when on a long-term growth trajectory. Investors often treat such occasions as a buying opportunity, and they have a strong argument for such thinking. The stock is up by more than 5,000% since its 2006 IPO. Additionally, its massive footprint may be just the beginning of its growth. Chipotle believes it can grow to 7,000 restaurants in North America alone. Also, it has begun to establish a presence in three European countries and the Middle East, dramatically increasing its growth potential. Despite its long-term growth, Chipotle's valuation may have made the stock particularly vulnerable. Its 40 P/E ratio is not unusual,, as it has long sold at a premium. Still, with profit growth nearly at a standstill, investors could start to question why they would pay a premium for this stock. If the P/E ratio fell to the 20 range, that in itself would take the stock price down by approximately half. Furthermore, since Chipotle is not a dividend stock, investors may question whether it pays to own this stock under such conditions. Should investors buy Chipotle stock after its Q2 earnings? Given the current state of Chipotle stock, investors should probably refrain from adding shares at this time. Indeed, Chipotle is one of the most successful restaurant stocks in history. That alone likely makes it a hold for long-term investors. Unfortunately for shareholders, investors have little incentive to purchase the stock just now. Competition and a sluggish economy have so significantly impacted sales that it now relies entirely on the rapid expansion of its footprint for revenue growth. Moreover, investors do not collect a dividend, meaning they rely on the stock beating the S&P 500 index to win with holding Chipotle. Thanks to tepid revenue and profit growth, investors no longer have an incentive to pay over 40 times earnings, making near-term pain for the stock more likely. Chipotle remains on track for a massive expansion assuming its restaurants continue to succeed abroad. Nonetheless, the slowdown in growth bodes poorly for its stock in the short term. Until its valuation aligns more closely with its growth rate, it is probably not worthwhile for investors to buy more shares. Should you invest $1,000 in Chipotle Mexican Grill right now? Before you buy stock in Chipotle Mexican Grill, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Chipotle Mexican Grill wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,063,471!* Now, it's worth noting Stock Advisor's total average return is 1,041% — a market-crushing outperformance compared to 183% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 21, 2025 Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Starbucks. The Motley Fool recommends the following options: short September 2025 $60 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy. Is Chipotle Stock a Buy After Its Second-Quarter Earnings? was originally published by The Motley Fool
Yahoo
20 hours ago
- Business
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Chipotle Mexican Grill, Inc. (CMG): The $5 Meal Line Was ‘Abhorrent,' Says Jim Cramer
We recently published . Chipotle Mexican Grill, Inc. (NYSE:CMG) is one of the stocks Jim Cramer recently discussed. Chipotle Mexican Grill, Inc. (NYSE:CMG) has appeared on Cramer's morning show several times in 2025. He has praised the firm's CEO, Scott Boatwright, commented on high menu prices, and outlined that he prefers Texas Roadhouse instead. This time, Cramer didn't hold back after Chipotle Mexican Grill, Inc. (NYSE:CMG)'s latest earnings results: '[On how year-to-date losses were getting material] Yeah, 4%, minus 4% comps, now they did try to put a good face on by saying that, the cadence was better. Otherwise, the stock would probably be down ten. But there was a moment on the call which was just very, very painful. Scott Boatwright talked about what the other guys were doing, the five dollar meal. Well I don't want to hear that. Cause the five dollar meal is not anything I ever want to eat. But at the same time he goes like, look with our competitors with snack occasion of five dollar meal, that's where the consumer is drifting. Towards value as a price point. Wow. I never know that this was a situation that McDonald's versus Chipotle. Now there's McDonald's down here in the scrum and Chipotle's up here. But that showed, either there's something structurally wrong with the company or they got to rethink about their pricing. I was disappointed. Photo by LikeMeat on Unsplash '[On whether the troubles were a reflection of poor management] I don't want it to be. I like him very much. That line was abhorrent. I didn't want to hear it. That the five dollar meal company that you would never eat at, cause it's just chemicals, is beating a company that's clean. That's how I felt.' While we acknowledge the potential of CMG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the . READ NEXT: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy Right Now. Disclosure: None. This article is originally published at Insider Monkey.
Yahoo
3 days ago
- Business
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Chipotle CEO says there's ‘no smoking gun' for burrito sales dip—but he wants customers to give the chain more ‘credit' for affordable prices
CEO Scott Boatwright said the burrito chain needs to work on selling itself as a bargain brand for jittery, budget-strapped consumers. The company reported on Wednesday a 4% same-store quarterly sales decline and cut its guidance for the rest of the year, citing poor consumer sentiment and economic uncertainty. As more Americans grow anxious about the economy and start pulling back on eating out, CEO Scott Boatwright wants consumers to give Chipotle some more credit for its low prices. The Newport Beach, California-based burrito-bowl chain reported sagging earnings Wednesday, including a 4% same-store sales decline and 4.9% dip in quarterly traffic. While Chipotle saw a 3% total revenue increase to $3.1 billion, the company cut its guidance, now expecting flat same-store sales growth for the year compared to its previous prediction of a low single-digit increase. Chipotle CEO Scott Boatwright attributed the rough quarter—Chipotle's second consecutive sales decline—in part to rocky economic conditions leading consumers to pull back. Chipotle's same-store sales improved in June, and that's likely to be the case for July as well, according to the company, but lackluster sales in April and May correlated with 'consumer sentiment bottoming around that time.' Boatwright added consumers have seemingly forgotten that Chipotle, compared to its fast-casual rivals, is a bargain. 'I don't think we're getting credit with the consumer today,' Boatwright told investors on Wednesday. 'So what I talked to the team about internally is, How do we better communicate our value proposition and center around the core equities of the brand?' 'I think we've got to figure out a way we can communicate value for the consumer and showcase the value we are to [quick-service restaurants] and fast-casual,' he added. Boatwright claimed in the earnings presentation Chipotle is 20% to 30% cheaper than comparable fast-casual restaurants. He told Fortune in April the chain wouldn't increase prices due to tariffs because 'it's unfair to the consumer to pass those costs off…because pricing is permanent.' Changing perceptions of value The CEO was firm in attributing Chipotle's sales slump to external macroeconomic factors, telling investors, 'There's no smoking gun here that says we've had a misstep.' However, he said low-income consumers in particular are looking for value when choosing where to dine. 'Look no further than what's going on with our competitors with snack occasions or five-dollar meals, and that's where the consumer is drifting towards…because of low consumer sentiment.' Indeed, fast-food giants like McDonald's are continuing to offer meal deals amid softening sales, particularly as these restaurants have seen more traffic from high-income consumers while those on a budget pull away. As Chipotle similarly tries to compete in an environment of cautious consumers, it will need to focus on its public perception and sell itself as an affordable option, according to Raymond James restaurant analyst Brian Vaccaro. 'Over the last two years, the industry has gotten more aggressive on value promotions and messaging,' Vaccaro told Fortune. 'There are certain brands that have a strong value proposition in the mind of the average consumer. But they didn't effectively message that, and it caused them to lose some mind share.' Olive Garden suffered this fate in 2024, Vaccaro said, when the fast-casual Italian chain's parent company Darden Restaurants reported a pull back from customers making less than $75,000. 'That could be something that's happened to Chipotle, where their value almost gets taken for granted a little bit,' Vaccaro said. In March, Olive Garden announced the return of its 'buy one, take one' promotion—essentially a buy one, get one free deal—for the first time in five years. The restaurant group attributed a modest earnings beat in June in part to the return of the offer. 'Everyone knows Olive Garden is a good value,' Vaccaro said. 'But if you're not reminding the guests of that, they could get distracted and wooed away by all of these value promotions that are floating around.' This story was originally featured on Sign in to access your portfolio
Yahoo
3 days ago
- Business
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CMG Q2 Deep Dive: Same-Store Sales Decline and Margin Pressures Shape Outlook
Mexican fast-food chain Chipotle (NYSE:CMG) missed Wall Street's revenue expectations in Q2 CY2025 as sales rose 3% year on year to $3.06 billion. Its non-GAAP profit of $0.33 per share was in line with analysts' consensus estimates. Is now the time to buy CMG? Find out in our full research report (it's free). Chipotle (CMG) Q2 CY2025 Highlights: Revenue: $3.06 billion vs analyst estimates of $3.11 billion (3% year-on-year growth, 1.5% miss) Adjusted EPS: $0.33 vs analyst estimates of $0.33 (in line) Adjusted EBITDA: $666.9 million vs analyst estimates of $663.6 million (21.8% margin, 0.5% beat) Operating Margin: 18.2%, down from 19.7% in the same quarter last year Locations: 3,839 at quarter end, up from 3,530 in the same quarter last year Same-Store Sales fell 4% year on year (11.1% in the same quarter last year) Market Capitalization: $61.33 billion StockStory's Take Chipotle's second quarter saw a negative market reaction as the company's revenue missed Wall Street expectations while profit was in line. Management attributed the underperformance primarily to softer consumer demand and a 4% decline in same-store sales, a reversal from strong growth last year. CEO Scott Boatwright described the quarter as facing a 'perfect storm,' citing challenging economic conditions, increased competition on value offerings, and lower consumer confidence. The company also highlighted lower group sizes and a shift toward lower-priced menu items as factors impacting sales and margins. Looking ahead, Chipotle's management is focused on regaining transaction growth and stabilizing margins through operational improvements, menu innovation, and targeted digital marketing. The company is banking on new menu items, expanded loyalty programs, and enhanced restaurant efficiency to drive customer engagement. Boatwright stated, 'We are confident in our plans to get back on our front foot,' emphasizing that upcoming initiatives—including catering tests and digital app enhancements—are expected to create momentum in the second half and into 2026. However, management remains cautious about ongoing macroeconomic volatility. Key Insights from Management's Remarks Management explained the quarter's results as a product of softer demand, operational investments, and shifting consumer preferences, while emphasizing ongoing initiatives to improve engagement and efficiency. Same-store sales decline: Leadership cited a decline in group sizes and a shift to lower-priced menu items, such as customers choosing chicken over steak, as key drivers of the 4% drop in same-store sales. This trend was linked to lower consumer sentiment and increased price sensitivity among lower-income customers. Operational investments: Management completed the rollout of produce slicers across all restaurants and began introducing high-efficiency equipment packages. These investments are intended to improve prep speed, consistency, and throughput, allowing staff to be better deployed during peak periods and supporting future growth platforms like catering. Digital engagement initiatives: The Summer of Extras loyalty program drove a 14% increase in enrollments and higher engagement, particularly among infrequent customers. Early tests of AI-powered customer journeys showed a 46% to 47% uplift in engagement, suggesting potential for further digital-driven frequency gains. Menu and marketing innovation: Limited time offers (LTOs), such as Chipotle Honey Chicken and Adobo Ranch dip, were highlighted as successful in driving incremental transactions. Management plans to increase the cadence of LTOs and roll out new sides and dips to maintain customer interest and offset seasonal slowdowns. International and new unit expansion: Chipotle opened 61 new restaurants in the quarter, including progress in Canada, Europe, and the Middle East. Leadership remains confident in the long-term potential of these markets, aiming to reach 7,000 restaurants in North America and expand international partnerships. Drivers of Future Performance Management expects future performance to be influenced by operational execution, marketing effectiveness, and persistent macroeconomic uncertainty. Consumer sentiment and value positioning: Management believes improvements in consumer confidence and clearer communication of Chipotle's value proposition will be crucial to regaining transaction growth. They acknowledged that the brand is not currently 'getting credit with the consumer' for its value, and plan to address this through targeted messaging and promotional strategies. Menu innovation and loyalty engagement: Planned increases in menu innovation—including more frequent LTOs, new sides, and dips—are expected to boost both frequency and average ticket size. Expanded loyalty initiatives, such as targeted programs for college students and AI-driven win-back campaigns, are seen as ways to reengage lapsed customers. Operational efficiencies and cost control: The rollout of high-efficiency equipment and supply chain initiatives are anticipated to drive margin improvement, even if sales growth remains modest. Management reiterated its long-term margin targets, assuming successful execution of these initiatives and a gradual return to higher average unit volumes. Catalysts in Upcoming Quarters In coming quarters, the StockStory team will be monitoring (1) the impact of new menu items and increased limited time offers on customer frequency, (2) the effectiveness of targeted loyalty and digital marketing campaigns in reengaging lapsed users, and (3) progress on operational efficiency from high-efficiency equipment rollouts and supply chain initiatives. Continued international expansion and the results of catering pilots will also be important indicators. Chipotle currently trades at $45.72, down from $52.83 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it's free). Stocks That Trumped Tariffs When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that's already erased most losses. Don't let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today. StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
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3 days ago
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Chipotle drives more customers to loyalty program as comparable sales slide
This story was originally published on CX Dive. To receive daily news and insights, subscribe to our free daily CX Dive newsletter. Dive Brief: Chipotle's emphasis on digital experience is paying off for its loyalty program, executives said on a Q2 2025 earnings call Wednesday. Digital sign-ups for the loyalty program increased 14% year-over-year, boosted by the launch of the 'Summer of Extras' gamified program, CEO Scott Boatwright said. The fast-casual restaurant chain also updated its app to provide a more seamless experience with personalized offers. Dive Insight: Despite success in digital, Chipotle saw a 4% decline in comparable sales during the quarter, continuing a streak of negative same-store sales that began last quarter. The fast-casual restaurant was hit by consumer sentiment and confidence 'bottoming out' in May, CFO Adam Rymer said. Still, revenue increased 3% year over year to $3.1 billion, according to its earnings report. Digital sales made up 35.5% of total sales. As the company looks to return to mid-single-digit comparable sales, Chipotle must execute across five strategies, including delivering an exceptional digital experience, Boatwright said. Creating an end-to-end frictionless user experience within the app drives the top of the funnel, while the loyalty program encourages repeat spend. 'To drive more people into our loyalty program, we are ramping up our enrollment campaigns and signage, both in restaurant and digitally,' Boatwright said. Executives are encouraged by results from Summer of Extras, a three-month gamified experience with extra points, badges and prizes. The program targets low-frequency users, the cohort of customers Boatwright sees 'most at risk.' The program drove more people into the rewards program and increased their frequency and spend year over year. 'The Summer of Extras promotion really engaged that consumer in a meaningful way and caused them to transact with us more frequently over June, July,' he said. Chipotle is planning another program to target college students in the fall and is taking the lessons learned from Summer of Extras to potentially inform an evergreen program. About 20 million rewards members are active or have made a transaction at least once in the past year, according to Boatwright.
