Why Chipotle Mexican Grill Stock Fell Today

Source The Motley Fool

Shares of popular restaurant chain Chipotle Mexican Grill (NYSE: CMG) fell on Wednesday after the company reported financial results for the third quarter of 2024. While financial results were strong, analysts seemed skeptical about the business looking forward. As of 11:30 a.m. ET, Chipotle stock was down almost 7%.

A good quarter but investors are worried

In Q3, Chipotle's business was booming. Same-store sales jumped by 6% year over year, helped by transaction growth of 3%. Coupled with opening new locations, overall revenue was up 13% to $2.8 billion. And the growth bolstered the bottom line as well, with adjusted earnings per share increasing by 17%.

These are strong numbers. However, analysts had lots of questions for Chipotle's management in the Q3 earnings call. Questions centered on the pace of new restaurant openings, operations at new locations, and ongoing inflation. In short, investors seem to wonder whether the company's growth is slowing and profit margins are about to take a larger hit.

In summary, Chipotle's Q3 report was basically what investors had expected and the guidance was little improved. So there was little reason for the stock to rise. And with investors now perceiving clouds on the horizon, Chipotle stock had reason to fall.

What should investors do now?

I think concerns over Chipotle's business operations are overblown. It's true that its restaurant-level operating margin dropped from 26.3% last year to 25.5% in Q3. But that's still a stellar profit margin.

Moreover, Chipotle's management believes it's making choices to support average sales volume of $4 million annually at each restaurant along with 30% operating margins. Hitting those numbers would be an extraordinary accomplishment, but it's realistic given where Chipotle is now and its history of strong operations.

That said, Chipotle stock isn't cheap even after today's pullback. Therefore, if investors want to own shares of a top operator, then Chipotle is still the stock to buy in the restaurant space. But for investors looking for a bargain, they may need to keep waiting for this one.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

  • Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $21,492!*
  • Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,204!*
  • Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $409,559!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 28, 2024

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends the following options: short December 2024 $54 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
2 Things to Watch When Uber Reports Its Q3 2024 ResultsTradingKey - Two decades ago, ride-hailing wasn’t a term that anyone had heard of. However, the rise of massive ride-hailing platforms have changed that and allowed anyone to catch a card ride when th
Author  Mitrade
9 hours ago
TradingKey - Two decades ago, ride-hailing wasn’t a term that anyone had heard of. However, the rise of massive ride-hailing platforms have changed that and allowed anyone to catch a card ride when th
placeholder
Can Apple’s Earnings Boost Its Underperforming Stock?Insights- Apple is set to release its fiscal Q4 2024 earnings after the U.S. market closes on Wednesday, October 31. Wall Street expects Apple’s Q4 revenue to increase by 5% year-over-year to $94.1 billion, with earnings per share growing 4.85% to $1.59.
Author  Mitrade
9 hours ago
Insights- Apple is set to release its fiscal Q4 2024 earnings after the U.S. market closes on Wednesday, October 31. Wall Street expects Apple’s Q4 revenue to increase by 5% year-over-year to $94.1 billion, with earnings per share growing 4.85% to $1.59.
placeholder
Alphabet Q3 results beat analyst estimates as ad-revenue climbs; shares jumpInvesting.com -- Alphabet reported Tuesday third-quarter results that topped Wall Street estimates as the search giant's advertising revenue climbed, easing concerns about the threat of competition fr
Author  Investing.com
12 hours ago
Investing.com -- Alphabet reported Tuesday third-quarter results that topped Wall Street estimates as the search giant's advertising revenue climbed, easing concerns about the threat of competition fr
placeholder
Ethereum Co-Founder Buterin Introduces ‘The Splurge’ UpgradeEthereum co-founder Vitalik Buterin has unveiled “The Splurge,” a comprehensive set of protocol upgrades aimed at addressing a variety of challenges within the Ethereum ecosystem. I
Author  Bitcoinist
12 hours ago
Ethereum co-founder Vitalik Buterin has unveiled “The Splurge,” a comprehensive set of protocol upgrades aimed at addressing a variety of challenges within the Ethereum ecosystem. I
placeholder
What if markets are wrong about a Republican sweep?Investing.com -- Markets are increasingly pricing in a Donald Trump victory and Republican control of Congress, but current polls suggest bets of a red wave aren't justified, stoking the risk of a "violent reversal" in U.S. stocks, Gavekal Research warned in a recent note.
Author  Investing.com
12 hours ago
Investing.com -- Markets are increasingly pricing in a Donald Trump victory and Republican control of Congress, but current polls suggest bets of a red wave aren't justified, stoking the risk of a "violent reversal" in U.S. stocks, Gavekal Research warned in a recent note.
goTop
quote