Think It's Too Late to Buy Chipotle Stock? Here's the Biggest Reason Why There's Still Time.

Chipotle Mexican Grill (CMG 2.33%) has delivered astonishing returns since its launch in 2006. The stock has surged over 5,000%, transforming an investment of $1,000 into an incredible $50,000.

Chipotle has successfully established itself as a pioneer in the fast-casual dining space. Despite facing challenges, including a significant E. coli scandal, the company has managed to maintain its strong market position.

Currently, Chipotle’s stock price is considered high, with a price-to-earnings ratio of 46 that may deter some potential investors. However, there remains a significant opportunity for continued growth and market outperformance.

Same-store sales will keep growing

For any restaurant chain, same-store sales are crucial, and Chipotle has consistently shown positive comparable sales performance throughout its history. This consistent growth allows the company to increase revenue without the need to open new locations, which in turn enhances its profit margins as the revenue grows without incurring extra rent and real estate costs.

In 2024, same-store sales increased by 7.4%. With the addition of digital ordering, delivery services, and drive-thru options, the revenue potential for each Chipotle restaurant is considerable. This flexibility means that operations aren't limited by traditional dining capacity, allowing more customers to be served efficiently.

Moreover, Chipotle has displayed its ability to raise prices, which can further enhance same-store sales going forward. Its strong brand image grants it noteworthy pricing power, which has been reflected in past pricing strategies.

Its restaurant opening target will increase

Currently, Chipotle aims to operate 7,000 restaurants in North America, nearly doubling from the 3,726 locations it had at the end of the previous year. While this target may suggest limited growth, it is likely that the company will continue to revise its goals upward as it expands its operations.

Innovations like the Chipotlane (drive-thru) can enable profitable restaurant locations in areas that weren't feasible in the past, such as busy interstate exits. Chipotle's average sales volume per restaurant is comparable to that of McDonald's, which has over 14,000 restaurants in the U.S. This strong positioning suggests that Chipotle could ultimately reach 10,000 locations or more, fueling further stock growth in the process.

In summary, while some investors may hesitate to enter Chipotle's stock at its current price, the company’s solid growth trajectory, strong same-store sales, and ambitious expansion plans indicate that there’s still ample opportunity to invest.

Chipotle, Stocks, Growth