Chipotle Mexican Grill is set to report its fiscal first-quarter results on April 24, and analysts expect the stock to trade lower with revenues and earnings potentially missing expectations slightly. Despite this, CMG’s stock has seen a 25% increase year-to-date, thanks to strong financial performance and a recent announcement of a stock split. The company has been able to maintain profitability through measures such as raising prices, and management anticipates mid-single-digit comparable sales growth and new restaurant openings in the coming years. Chipotle’s successful rewards program has also contributed to its positive performance, with digital ordering making up 37% of revenue in 2023.
The recent announcement of a 50-for-1 stock split by Chipotle aims to make the stock more approachable for retail investors, potentially driving up demand. While the stock split will not change the value of the company, it will bring down the share price significantly. The stock has experienced strong gains in recent years but has seen inconsistent returns, underperforming the S&P 500 in some years. It remains to be seen if Chipotle will be able to maintain its growth trajectory in the current macroeconomic environment, which includes high oil prices and elevated interest rates.
Analysts forecast that Chipotle’s valuation is currently 11% lower than its current market price. Revenues for the first quarter are expected to come in slightly below consensus estimates, with Trefis forecasting $2.6 billion. The company’s operating margin and restaurant-level operating margin expanded in 2023, and Chipotle opened 271 new locations. While the company is fairly saturated in urban areas in the U.S., it has been expanding into suburbs and internationally, with plans to open stores in Dubai and Kuwait.
Chipotle’s earnings per share for the first quarter are also expected to miss consensus estimates slightly. The company’s highest-margin sales come from digital orders, which have been driving profit growth. Despite the current expensive P/E ratio of 67x, analysts believe that Chipotle’s stock is due for a meaningful retracement, especially considering its recent surge. Comparisons with peers such as McDonald’s and Starbucks show where Chipotle stands in terms of valuation and performance metrics. Investors can access more information on Chipotle’s performance and future prospects through Trefis Market Beating Portfolios and peer comparisons.
