Should You Buy Chipotle Stock Right Now and Hold It for the Next 20 Years?

Chipotle Mexican Grill (NYSE: CMG) reported its financial results for the first quarter on Wednesday, posting adjusted earnings per share of $0.29, which exceeded Wall Street estimates. However, its revenue of $2.9 billion came up short of expectations.

This top restaurant stock has been a huge winner over the past five years (as of April 24), rising by 184%. But investors are losing their appetite for it in 2025. Shares have tanked by 18% so far this year, and they're down 28% from the all-time high they set in June 2024.

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Has that decline set Chipotle up as a stock you should buy now on the dip and hold for the next 20 years?

Dealing with economic weakness

U.S. consumers aren't in the best shape these days. The University of Michigan Consumer Sentiment Index's reading this month was the second lowest on record (data goes back to 1952). The only other time it was worse was in June 2022, right after the Federal Reserve started aggressively raising benchmark interest rates to combat soaring inflation.

The U.S. might not officially be in a recession right now. But the overall mood of consumers is far from rosy as they attempt to cut back on their discretionary spending in preparation for more difficult times ahead. That's taking a toll on Chipotle, a business that previously had enjoyed fairly durable demand.

The fast-casual Tex-Mex pioneer reported a surprising same-store sales decline of 0.4% in the first quarter. That was its first year-over-year drop since the second quarter of 2020 -- the onset of the COVID-19 pandemic. And it was a drastic reversal from the 7% gain it registered in Q1 2024.

"In February, we began to see that the elevated level of uncertainty felt by consumers are starting to impact their spending habits," CEO Scott Boatwright said on this week's earnings call. The company's outlook calls for same-store sales to increase in the low single-digit range for the full year.

To its credit, though, Chipotle has long implemented a strategy that focuses on its value proposition for customers. Management still believes this is the company's key strength, highlighting the below-$10 average cost of its chicken burritos and burrito bowls, its most popular entrees.

"This is about 20% to 30% below comparable fast-casual meals and can reach as high as 50% below comparable meals in some markets," Boatwright said about those menu items. This could at least provide a buffer that will allow Chipotle to fare better than rivals in a recessionary scenario.

Chipotle's growth story

It's easy to get caught up in the latest news about slowing sales, but don't let that cause you to forget Chipotle's phenomenal longer-term track record of strong financial performance. Between 2019 and 2024, its revenue rose by 102% while net income surged by 338%.

That growth came not just from higher sales per store, but also its rapidly expanding physical footprint -- and its efforts on that second front continue. Chipotle currently has 3,781 locations, with a goal of opening about 273 more before the year is over. It now has five restaurants in the Middle East, and the company just signed an agreement to open its first Chipotle in Mexico next year.

The management team remains confident that it will eventually hit its long-term target of having 7,000 stores open in North America. Based on one of its other objectives -- getting to $4 million in annual unit volume -- Chipotle is aiming for a top line of $28 billion a year at some point in the future. Given the company's track record of success, it's easy to be optimistic that it will hit that goal.

Is the stock expensive?

Shares of Chipotle usually aren't on the discount rack. That's because the market understands that this is a great business.

However, with the stock trading 28% off its peak, I think there's an opportunity here. Its current forward P/E ratio of 39 isn't necessarily a bargain, but it's certainly more reasonable than the multiple of 52 it traded at one year ago.

In my opinion, dollar-cost averaging your way into an investment in Chipotle and holding on for the long term seems like a smart strategy now. The company remains on course to have significantly greater revenues and earnings 20 years from now.

Should you invest $1,000 in Chipotle Mexican Grill right now?

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Neil Patel 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 June 2025 $55 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.