Chipotle Mexican Grill (NYSE: CMG) is set to report its fiscal first-quarter results on April 24, with expectations of slightly lower revenues and earnings. The company’s stock has seen a 25% increase year-to-date, driven by strong financial performance and a recent stock split announcement. Despite slowing growth, Chipotle’s profitability remains strong, thanks to menu innovation, price increases, and effective digital strategies. Management expects mid-single-digit comparable sales growth in 2024 and plans to open 285 to 315 new restaurants. Chipotle’s successful rewards program, which topped 36 million members in 2023, has also contributed to its positive performance.
The announcement of a 50-for-1 stock split by Chipotle aims to make the stock more accessible to retail investors and potentially increase demand. While the stock split won’t change the value of the business, it will significantly lower the share price from nearly $2,870 to around $57 post-split. This move could attract more investors to the stock and lead to increased interest and trading activity. The approval of the stock split is subject to shareholder approval at Chipotle’s annual meeting in June.
CMG stock has shown strong gains of 105% since early January 2021, outperforming the S&P 500. However, the stock has had inconsistent returns over the years, underperforming the index in both 2021 and 2022. In a volatile macroeconomic environment, Chipotle may face challenges in maintaining its stock performance going forward. Trefis’ forecast suggests a valuation of $2546 per share, indicating a potential 11% drop from the current market price. The company’s operating margin and restaurant-level operating margin expanded in 2023, with plans to open more restaurants in North America and internationally.
Chipotle’s Q1 2024 revenues are expected to be slightly below consensus estimates, with a forecast of around $2.6 billion. The company saw a 14% year-on-year revenue growth in 2023, driven by new restaurant openings. Operating margins also improved in 2023, with a focus on expanding Chipotle’s presence in suburban and international markets. Similarly, earnings per share for Q1 2024 are projected to miss consensus estimates marginally, with a forecast of $11.60. Chipotle’s highest-margin sales come from digital orders, positioning the company for continued profit growth.
Despite Chipotle’s strong performance, its stock price estimate is lower than the current market price, with Trefis valuation suggesting a price of $2546. The current P/E ratio of 67x is considered expensive compared to peers like McDonald’s and Starbucks. The stock has experienced significant growth since October 2023, raising questions about a potential retracement. Investors can assess Chipotle’s performance against peers using the CMG Peers tool for a comprehensive industry comparison and make informed investment decisions based on Trefis market insights.
