Should Investors Buy Into the Chipotle Turnaround?
Chipotle continued its turnaround with another quarter of positive same-store sales growth.
Chipotle Mexican Grill (CMG) has demonstrated a positive turnaround with three consecutive quarters of rising comparable-store sales. Despite this, the stock remains down more than 15% this year. The company's same-store sales growth has been solid since the onset of 2026, with modest increases each quarter. However, a slowdown in October suggests the momentum may be waning.
Despite this, Chipotle anticipates a rebound in fourth-quarter sales growth, driven by marketing efforts and the launch of its brisket limited-time offering in November. Revenue for the quarter reached $3.29 billion, with adjusted EPS dropping 7% to $0.27, aligning with analyst expectations. However, the company's restaurant-level operating margin decreased by 120 basis points to 23.3%.
To address this, Chipotle plans to raise prices by 3% in Q4. The company has also expanded internationally, opening 84 company-owned locations in the U.S., plus five in Mexico, Saudi Arabia, and South Korea. Looking ahead, Chipotle plans to add 350-370 new restaurants in 2026, including international locations. While the company shows signs of recovery, high inflation and slow sales growth are hindering profitability.
With a forward P/E multiple of 23 times 2027 estimates, Chipotle appears reasonably valued. However, potential investors may want to wait for further execution before jumping on the recent rally.
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