Chipotle’s stocks fall despite ongoing traffic growth. Is this an opportunity to buy stocks?

Chipotle Mexican Grill (NYSE: CMG) It was skied following the release of its fourth quarter results, despite the company reporting ongoing profits in traffic. At the time of this writing, stocks have fallen 5% per year, extending the two-month decline to 12%.

Let’s dig into Chipotle’s recent earnings and see if this is the best time to buy stocks.

The popular high-speed casual restaurant chain has posted the vy hopeful quarterly results for most quick service restaurants. Revenue rose 13% year-on-year to $2.855 billion, meeting analyst expectations. Equivalent restaurant sales As edited by StreetAccount, analysts jumped 5.4%, slightly below the expected 5.7% increase.

Transactions increased by 4.0%, supported by better throughput and limited time (LTO) in smoked briskets, while average checks rose by 1.4%. However, January had a tough start, with sales in the same month falling by about 2% of the month. The company said it had a significant impact from bad weather, Los Angeles wildfires and unfavourable calendar shifts (New Year’s Day fell on Wednesday, delaying consumers’ return to normal routines). When combined, these headwinds have had a fundamental impact on comparable restaurant sales of around 400, and management is currently considering selling Flattish equivalents in the first quarter of 2025.

Meanwhile, earnings per share (EPS) rose 19% to $0.25, surpassing the $0.24 consensus.

Sales costs rose 70 basis points to 30.4% as Chipotle continues to refocus on the larger parts while experiencing costs associated with Brisket LTO. Labor costs as a percentage of sales rose 20 basis points to 25.2% due to wage inflation.

These numbers are important as they feed restaurant-level profit margins and fell from 25.4% a year ago to 24.8%. This metric measures how profitable an individual restaurant is. This is an area where Chipotle always shines brightly with a very efficient model. You may need to increase some to keep your customers happy, but it has impacted your profitability. The company aims to innovate and other efficiencies to regain restaurant-level margins.

Chipotle opened 119 new company-owned locations in the quarter, and in 2024 the 304. This year, we plan to open new restaurants ranging from 315 to 345.

Going forward, Chipotle expects sales at the same stores for the entire year of 2025 to grow in the low to mid-digit range. Management plans to raise prices by around 2% per year. As the new administration’s tariffs make headlines, the company said it is also procuring sources of around 2% of its revenue from Mexico and less than 0.5% from Canada and China. Overall, tariffs will affect the cost of goods of around 60 basis points when implemented, but chipotle can be completely offset later in the year through supply chain efficiency.

The story continues

Chipotle ran into some small, same store sales issues in January, but nothing appears to be changing the company’s long-term path. Chipotle has a long history of innovation, including introducing machines that cut avocados, removing cores and scoops, improving operations. This should ultimately offset the restaurant-level margin pressure we have experienced recently.

Meanwhile, the company still has a solid runway to continue adding new locations with 8% to 10% clips per year. There’s plenty of room for expansion in the US, and it’s really just touching the surface internationally. The chances are quite large. Chipotle has only 85 restaurants outside of the US, 55 of which are in Canada. This year we will work to accelerate our expansion in Canada and the Middle East. They are also looking to grow pipelines in Western Europe.

From an valuation perspective, stocks trade at a Revenue from forward price (P/E) Based on the 2025 estimate, the multiple of about 44 was pleasantly visible within the range we’ve seen in the past few years.

In the long run, Chipotle will continue to be one of the biggest recipients of the restaurant industry. The company is increasing traffic while showing off its pricing capabilities. At the same time, there is a clear path to expanding your strike account. Based on these factors, investors should buy dip.

Have you ever felt like you missed a boat when buying the most successful stocks? If you do that, you’ll want to hear this.

In rare cases, the team of analyst experts “Double Down” stock Recommendations for businesses they think are trying to pop. If you’re worried that you’ve already missed the chance to invest, now is the perfect time to buy before it’s too late. And the numbers speak for themselves:

• nvidia: If you invest $1,000 when it doubled in 2009, There is $333,669! *

• apple: If you invest $1,000 when it doubled in 2008, There’s $44,168! *

• Netflix: If you invest $1,000 when it doubled in 2004, There is $547,748! *

Currently, we are issuing “double-down” alerts to three incredible companies, and we may not have a chance like this anytime soon.

learn more “

*Stock Advisor will return as of February 3, 2025

Jeffrey Sayler There is no position in any of the stocks mentioned. Motley Fools have been hired and recommended to Chipotle Mexico grill. Motley Fool recommends the following options: $58 call to short chipotle mexican grill in March 2025. To Motley’s fool Disclosure Policy.

Chipotle’s stocks fall despite ongoing traffic growth. Is this an opportunity to buy stocks? Originally published by The Motley Fool