Key insights
- Chipotle's Q1 comparable-restaurant sales beat expectations, lifting the stock. However, cautious full-year guidance tempered enthusiasm. Management cited a "dynamic consumer environment" for the conservative outlook, despite trending higher. Increased protein orders and successful limited-time offers are driving sales. The stock's performance hinges on sustaining these positive trends.
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Wall Street seems to think Brian Niccol's new company, Starbucks, is "back." It might need more time to come around on the one he left—but there are encouraging signs there, too.
Shares of Chipotle Mexican Grill (CMG) were up 3% in afternoon trading Thursday, lifted by an 0.5% rise in first-quarter comparable-restaurant sales. While not a huge number, it's an improvement when compared to last year's decrease, and better, according to Visible Alpha data, than Wall Street expected. The stock's move has it pointing back toward a climb off lows that started in late March, though they're still down for the year. Over the past 12 months, they've lost roughly a third of their value.
Should investors be more upbeat about what's coming down the burrito production line? If they're not, it may be because the company sounds cautious, too. Chipotle maintained full-year guidance for comparable-store sales, which it sees coming in flat.
The company, CFO Adam Rymer said on a conference call, is "trending higher" than its forecast. "Guidance reflects a conservative outlook given the dynamic consumer environment," he added.
Chipotle stock was for years a powerful gainer, but the stock has generally fallen since late 2024. The latest quarterly results suggest some reason for optimism if the forces that have improved comparable-restaurant sales keep bringing eaters in.
Chipotle's latest efforts to beef up sales have helped, executives said. Diners are still loading up on protein—at one point, according to the company, customers were putting additional protein in nearly a quarter of all orders—and seem to like a new sauce option. Management thinks many of those who came in for limited-time offers will stick around.
"Our protein limited-time offers typically generate a few hundred basis points of transaction lift over the life of the promotion," Rymer said on the call, a transcript of which was made available by AlphaSense. "The biggest benefit occurs during the first few weeks as we see increased frequency as well as more new guests. Also, we sustain part of this comp lift longer term as many of our new guests continue to dine at Chipotle after the limited-time offer ends." (Sauces can have the same effect, he said.)
Bank of America analysts are banking on the picture improving. They have $50 price target that is more than 50% above yesterday's close and among the higher projections on the Street. "We expect CMG's current outlook could prove conservative," they wrote.
JPMorgan analysts are less optimistic. They clipped their target by a couple of bucks to $38, a more modest premium to recent prices, saying they're "not chasing" the stock.
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