Not long ago, this was one of Wall Street’s most loved names. Over a five-year stretch ending mid-2024, the stock surged nearly 370%, driven by consistent double-digit sales growth and best-in-class restaurant execution.
This year has been a different story. Shares are down more than 28% year-to-date, off nearly one-third from their peak, after two straight quarters of declining same-store sales and lowered guidance.
In a market focused on flashy growth stories and AI-driven narratives, the stock has slipped off many investors’ radars.
That could be a mistake. Beneath the near-term weakness, the long-term expansion plan is intact, margins remain enviable, and valuation has reset to its most attractive level in years.
For patient investors, this may be a moment to revisit one of the restaurant industry’s most reliable growth engines.
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Recent Results: Weak Traffic, But Not a Broken Model
Chipotle’s [CMG] Q2 numbers disappointed the Street.
Revenue came in at $3.06 billion, shy of the $3.11 billion consensus, and same-store sales fell 4% year-over-year, worse than the 2.9% decline analysts expected. Transactions were down 4.9%, though average check size increased about 1%.
Management responded by cutting full-year same-store sales guidance to flat, down from low single-digit growth. This marked the second consecutive quarter of a guidance cut, following a Q1 comp decline of 0.4%.
The weakness reflects macro headwinds and softer discretionary spending, especially among lower-income customers. CEO Scott Boatwright noted that May was particularly challenging, tracking closely with a dip in consumer sentiment.
But the quarter also showed signs of stabilization. Sales trends improved in June, aided by summer promotions and the launch of the Adobo Ranch dip. Positive comp and transaction growth continued into July, suggesting the worst may be behind them.
Action Plan: |
Poll: What will matter most for Chipotle's rebound?
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Strategic Positioning: Expansion is the Engine
Chipotle remains one of the most profitable scaled restaurant operators in the world. Q2 restaurant-level operating margin was 27.4%, a figure most peers can’t touch.
Even in a softer sales environment, those margins allow for strong cash generation and reinvestment.
Both same-store sales and aggressive unit expansion drive growth. The company opened 113 net new restaurants in the first half of 2025 and is on track for 315–345 openings this year. Long-term, management aims for 7,500 North American locations, up from 3,839 today.
That footprint expansion, coupled with menu innovation and brand strength, provides a long runway. Average unit volumes remain over $3.1 million, reinforcing the profitability of new stores.
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Outlook: Resetting Expectations
Near-term traffic challenges are real, but they’re not unprecedented. Chipotle has faced temporary sales slowdowns before, only to regain momentum through operational discipline and brand loyalty.
The long-term drivers are still in place:
Menu innovation: Seasonal and limited-time offerings that attract new visits
Digital strength: Strong mobile ordering and loyalty program integration
Operational efficiency: Technology and training to improve throughput
Unit expansion: Consistent double-digit annual store growth
Analysts still expect earnings to grow at an 8–10% CAGR over the next few years, with revenue growth around 7–8%. A return to mid-single-digit comps could support multiple re-expansion and outsized share price recovery.
Trading Strategy: For active traders, consider scaling in rather than taking a full position immediately. The recent selloff has created a technical oversold condition, but sentiment may take time to turn.
Building a position in tranches over the next quarter can help average down entry cost and capture upside if comps recover faster than expected.
Watch the $42 level as near-term technical support and the mid-$40s as the first resistance zone to clear.
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Risks to Watch
Prolonged traffic declines
If consumer sentiment remains weak or promotions fail to boost visits, comps could stay negative longer than expected.Margin compression
Food inflation, labor costs, or aggressive discounting could erode restaurant-level margins.Competitive pressures
Fast-casual peers and QSR giants are also targeting value-seeking diners, increasing promotional intensity.Overexpansion risk
Opening too many stores too quickly could strain quality control and cannibalize sales in existing locations.Valuation sensitivity
Even after the pullback, the stock trades at a premium to the broader restaurant sector. Another earnings miss could compress the multiple further.
Action: How to Position Now
For long-term investors, the reset in Chipotle’s valuation creates an opportunity to add a high-quality growth name at a multi-year discount.
The key is patience, as comps may stay choppy in the short term, but the unit expansion plan and margin profile point to stronger earnings power over time.
Investors can consider initiating a partial position now and adding on further weakness, while keeping an eye on quarterly traffic trends and new store productivity.
For those already holding, maintaining core exposure while avoiding overleveraged bets can allow participation in a potential multi-year rebound without taking undue near-term risk.
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Final Take
Chipotle’s recent slump is a reminder that even elite operators aren’t immune to macro pressures and shifting consumer behavior. But it’s also an opportunity: the core business model remains intact, expansion plans are on track, and the brand still commands strong loyalty.
With valuation at multi-year lows, margins holding strong, and traffic trends showing early signs of a rebound, long-term investors may see this as a re-entry point. f
If management delivers on its growth plan and comps recover, the market’s skepticism could quickly turn back into enthusiasm.
For now, it’s a case of watching the comps, tracking new unit performance, and remembering that durable growth stories often reassert themselves when expectations are at their lowest.
That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.
Best Regards,
— Adam Garcia
Elite Trade Club
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