Chipotle Bought Back Stock at $34.05 a Share Last Quarter. Is It Still a Buy Today?

Chipotle Mexican Grill (CMG) saw its stock price soar to a record high of $68.55 per share on June 18, 2024, as investors were thrilled by the company's strong comparable-store sales growth, expansion efforts, and rising operating margins. However, by the next quarter, the stock had retreated to around $35, following a decline in comparable-store sales growth and a drop in margins. The abrupt departure of CEO Brian Niccol, who left to take the helm at Starbucks, added to the selling pressure.

Despite these challenges, Chipotle has been actively buying back shares. In the latest quarter, the company repurchased $110 million worth of shares at an average price of $34.05 per share, just below its current trading price. This move indicates the company's confidence in its long-term potential. In 2024, Chipotle's comparable-store sales grew by 7.4%, while its restaurant-level margins expanded by 50 basis points to 26.7%. For the year 2025, however, comparable-store sales declined by 1.7%, and margins fell to 25.4%.

Despite these setbacks, Chipotle has continued to expand its footprint, increasing its restaurant count from 3,726 to 4,042 locations. The company attributes its slower growth to increased competition and inflation, which have driven up food and labor costs. Chipotle's strategy of opening new locations could pose a risk if they fail to achieve the expected growth in the first year.

Looking ahead, Chipotle expects its comparable-store sales to grow by the low single digits in the next year as it plans to open 350-370 new restaurants. Analysts project the company's revenue to increase by 9% while adjusted earnings per share (EPS) are expected to decline by 7%. For 2027, they anticipate revenue and adjusted EPS to grow by 11% and 22%, respectively, as inflation subsides.

The company aims to open 340-360 new company-owned restaurants in the U.S. and Canada, with most using Chipotle's new ordering system, Chipotlanes.

At its current price of $35, Chipotle's stock trades at 27 times next year's estimated earnings. While this may not seem like a bargain, the stock's downside could be limited if its growth accelerates once again in the coming years. Additionally, Chipotle has $1.57 billion in remaining buybacks under its current authorization. Therefore, for investors who believe the company's business will recover in the near future, buying Chipotle's stock today could be a wise decision.