Chipotles kurstapp en öppning för långsiktiga

The burrito maker has fallen since splitting its shares, and now looks ready to rebound.

Few restaurant stocks have been able to hit the sweet spot the way Chipotle Mexican Grill has in recent years. While other chains have struggled as price-sensitive consumers pull back, the burrito maker has appeared unstoppable, delivering a seemingly endless string of impressive earnings results and guidance—with share price gains to match.

That is, it did until late last month, when Chipotle reported second-quarter results . Although its earnings per share of 33 cents, revenue of $3 billion, and same-store sales above 11% topped analysts’ estimates, as usual, the company’s post-report pop soon fizzled. Shares, at a recent $54.32, are down some 13% over the past month, following Chipotle’s 50-to-1 stock split.

The stock’s subsequent decline looks like a buying opportunity.

“We don’t think there’s any great reason for its pullback except for general concerns in the economy and the restaurant space overall,” Dan Ahrens, portfolio manager of the AdvisorShares Restaurant exchange-traded fund, told Barron’s . “This could be a good entry point for long-term investors.”

They have reason to be anxious. Comparable-store sales showed a deceleration in June—and probably will in July, too. But more worrying is a rise in expenses, tied to the necessary investments the company will have to make in labor, technology, food sourcing, and menu innovation. Managing these issues has been key to supporting the stock’s tremendous multiyear rally. But now, rising costs, combined with a cautious consumer reluctant to accept price increases, could weigh on margins.

Randy Hare, director of equity research at Huntington Private Bank, wants more confirmation in the coming quarters that Chipotle can control costs and preserve margins. The company has a strong history of execution, he says, and he doesn’t doubt that expenses will land within the expected range, but “the costs aren’t going in the right direction.”

Those concerns, however, shouldn’t derail Chipotle’s growth. The company’s sales and margins were once again ahead of estimates in the quarter, and it plans on increasing new restaurants by 8% to 10% a year over the long term, as it works toward its goal of 7,000 locations, nearly double what it has now. Foot traffic jumped 17% in the second quarter from the year-ago period, according to data from Placer.ai.

Chipotle also seems somewhat immune from the pressures faced by McDonald ’s and other peers, which have faced pressure from consumers’ laser focus on value . Chipotle, in contrast, has noted that transactions are growing across all income levels and that it’s gaining market share, as well.

Earnings-per-share growth, while moderating from pandemic highs, is still expected to hit 22% this year and 19% in 2025, according to the Street consensus. If Chipotle matches analysts’ estimates of $1.09 a share this year, that will be roughly four times higher than 2019’s per share profits.

Coming catalysts include the return to the menu of brisket, one of its most popular offerings; continued automation; momentum in digital ordering; and supply-chain efficiencies, which can act as offsets to margin pressure.

Together, those factors suggest that the selloff in Chipotle stock, coming as investors rotated out of recent winners like semiconductor stocks, might have more to do with investor sentiment than profit margins. And there are reasons to think that Chipotle, more likely than not, will once again navigate these headwinds successfully.

The decline also presents a rare chance for investors to scoop up the perennially pricey shares. While 43.5 times 12-month forward earnings may not seem like a steal, it’s certainly lower than June’s 55-plus or its five-year average of roughly 50 times.

“The stock is trading below both its absolute and relative (to the S&P 500 index) price/earnings multiples when compared to the three- and five-year averages,” wrote Allspring Global Investments analyst Abby Roach in an email. “The stock continues to look attractive from a valuation perspective.”

Chipotle will never be considered a true bargain, says Kevin McCarthy, a senior research analyst at Neuberger Berman, but it’s hard to argue with the company’s dominance and value proposition for consumers. “It’s in a rare echelon of traffic winners because it puts value on the plate, and the brand scores incredibly well where it needs to, particularly with younger consumers,” he says.

In a year when chip stocks have dominated, the tortilla variety deserves investor attention, too. Buy on the dip.