Chipotle Stock Is Up Over 90% This Year, And Could Go Higher After Beating Earnings

Food & Drink

Topline: The top-performing stock in the S&P 500 this year, Chipotle beat third-quarter earnings expectations on Tuesday, as the fast-casual burrito chain continues its meteoric comeback from a string of food safety issues several years ago.

  • Chipotle reported solid earnings that came in higher than analyst estimates, thanks to strong sales momentum—especially in digital platforms like delivery, success of new menu items like carne asada and more favorable avocado prices.
  • Chipotle’s earnings mark yet another quarter of impressive growth, cementing the burrito chain’s rebound from a series of food safety lapses, such as E. coli outbreaks and salmonella, that plagued the restaurant from 2015 to 2017.
  • Third-quarter profits were $3.82 per share, compared with $3.22 expected; overall sales grew almost 15% to $1.4 billion, with revenue for 2019 now expected to hit $5.5 billion—a marked increase from $4 billion two years ago.
  • Digital sales, spurred by expanded delivery and pickup options as well as a new Chipotle loyalty app, also continued to grow dramatically.
  • Chipotle shares fell nearly 2.5% before reporting earnings, then jumped 2% in after-hours trading; overall, the stock has soared more than 90% this year and is up over 160% over the last two years.
  • Wall Street had been upgrading Chipotle’s price target going before earnings: Goldman Sachs analysts maintained that the stock could surpass $1,000 per share, while Bank of America Merrill Lynch analysts upgraded their price target to $850.

Crucial quote: “Chipotle’s digital ecosystem—which includes mobile order and pay loyalty [promotions] and digital delivery—has rapidly become the engine behind its impressive comeback story,” KeyBanc Capital Markets analysts wrote in July.

Key background: Chipotle pioneered the fast-casual chain in the early 2000s, with fast-food style service but also quality ingredients. Chipotle was consistently one of the S&P 500’s top growth stocks in the decade following its 2006 IPO, until a string of food safety issues in 2015 caused investors and diners to lose faith. After hiring Brian Niccol, the former head of Taco Bell, in early 2018, Chipotle started rebounding by making a big push into digital platforms like delivery, implementing better quality control, introducing new menu items and employing national marketing techniques.

Crucial statistic: Chipotle stock has more than recovered since food safety scares had caused it to plummet to less than $300 by early 2018; it now trades for just over $830 per share.

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