Chipotle (CMG) Shares Skyrocket, What You Need To Know

Anthony Lee /
2024/04/25 3:42 pm EDT

What Happened:

Shares of mexican fast-food chain Chipotle (NYSE:CMG) jumped 7.3% in the afternoon session after the company reported a "beat and raise" quarter. Fourth quarter results beat analysts' expectations for same-store sales, revenue, gross margin, and EPS. Notably, the results benefited from new restaurant openings (47 new restaurants in Q1), while comparable sales growth was driven by higher transactions(+5.4%) and an increase in average checks (+1.6% ). Moving on, full-year guidance for comparable store sales was raised from a mid-single digit year-on-year percentage increase to a mid to high-single-digit percentage increase. Zooming out, we think this was a great quarter that shareholders will appreciate.

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What is the market telling us:

Chipotle's shares are not very volatile than the market average and over the last year have had only 3 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the company gained 8.4% on the news that the company reported fourth-quarter results with revenue, same-store sales, and EPS exceeding analysts' estimates. The company's outperformance was driven by strong year-on-year unit growth of 7.4%. It also got a pricing tailwind of 1.0% and opened more restaurants in the quarter than expected (121 vs estimates of 117). 

A highlight of Chipotle's 2023 was that it formed its first international partnership with franchisee Alshaya Group in the Middle East. Should the company lean into franchising more going forward, financial performance could improve since the franchise model generally yields higher-margin royalty revenue and requires less capital investments. Looking ahead, Chipotle expects same-store sales growth in the mid-single digits for 2024, along with 300 new store openings. Overall, this was a fantastic quarter that should have shareholders cheering.

Chipotle is up 39% since the beginning of the year. Investors who bought $1,000 worth of Chipotle's shares 5 years ago would now be looking at an investment worth $4,601.

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