Down 33%, Is Chipotle a Buy Now?
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Chipotle is facing its biggest challenges in years.
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4 min read
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investment
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July 28, 2025
06:15 PM
The Motley Fool
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Chipotle Mexican Grill (CMG -3. 86%) has been one of the best-performing restaurant stocks of all time
However, Since its 2006 IPO, the burrito roller is up more than 5,000%
However, the company is now facing what appears to be its biggest challenge since at least COVID, and possibly going back to its E (which is quite significant)
Ing the departure of star CEO Brian Niccol, who took the top job at Starbucks nearly a year ago, Chipotle has now reported two straight quarters of declining comparable sales
Though weakening consumer sentiment and discretionary spending are at least partly to blame for its struggles, the setbacks are bad enough that new CEO Scott Boatwright announced a multi-step plan to get the company back to growth after the stock fell 13% on Thursday, meaning it's now down 33% from its peak from late last year
The sell-off is understandable ing the second-quarter results
Comparable sales fell 4% on a 4 (fascinating analysis) (something worth watching). 9% decline in transactions, showing that customers simply aren't visiting as often
Nevertheless, Revenue still rose 3% to $3, in light of current trends. 1 billion due to the effect of new store openings, amid market uncertainty
Operating margin was down from 19. 2%, while adjusted earnings per fell from $0
On the other hand, Management also lowered its comparable sales guidance to flat
Image source: Getty Images, in today's market environment
Additionally, Chipotle's plan to bounce back On the earnings call, Boatwright described some of the changes he's making at the fast-casual chain and hinted at others, in today's financial world
Conversely, For example, Chipotle is rolling out a high-efficiency equipment package that includes new planchas, rice cookers, and fryers
Additionally, the company has added duce slicers to all restaurants to help imve prep times (fascinating analysis)
Among other things, Boatwright is hopeful that this will drive greater demand for Chipotle's catering, driving it from 1% to 2% of sales to 5% to 10% of sales
It also sees opportunities to imve throughput
On the other hand, To counter a slowdown in summer visits, the company is ramping up its marketing, and it has returned to positive comps as of June, in light of current trends
The company launched Summer of Extras, a gamified experience allowing rewards members to earn extra points and prizes
Boatwright also hinted at doing more to emphasize Chipotle's value position
Market analysis shows 's un if that means offering something a value or lower-cost items, or if Chipotle would emphasize its value in its marketing more
The new CEO seems to be ing in the footsteps of Niccol, who also adopted some of the classic strategies of traditional fast food
This includes the drive-thru, which Chipotle has modified to its Chipotlane, which requires customers to order digitally
However, Chipotle also introduced a one-hour buy-one, get-one (BOGO) free, which was available during the normally slow hour of 3 p
Moreover, Is Chipotle a buy, in light of current trends
Additionally, Chipotle's price-to-earnings (P/E) valuation fell to a recent low on the sell-off at 40, but that's still expensive by conventional standards and compared to the S&P 500's P/E ratio of 27, given current economic conditions
The recent decline in comparable sales may not be a reason to be alarmed, either
After all, the company has already returned to positive comps growth as of June and in July through the date of the report, amid market uncertainty
We also know that restaurants have seen slowing growth this year due to weakening consumer sentiment, as spending on restaurants is one of the easiest areas for people to pull back on
The fast-casual chain also continues to plan for having 7,000 restaurants over the long term, double what it has today
Despite the recent weakness, there's no reason to think that there's any fundamental change in Chipotle's model or its customer perception (fascinating analysis)
On the other hand, While the stock could be volatile over the coming months as the trade situation is still in flux, Chipotle still looks a solid buy over the long term (an important development).
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