Fast-casual restaurant chain Chipotle Mexican Grill (NYSE: CMG) has gained 25% since the start of 2024, aligning closely with the S&P 500’s performance over the same period. Comparatively, CMG’s competitor Starbucks stock(NASDAQ: SBUX) has risen approximately 20% in the same timeframe. See What’s Next For Starbucks’ Stock After An Upbeat Q1? But what’s driving CMG stock?
The rise in CMG stock is largely due to the company’s robust revenue growth in FY 2024, fueled by menu innovation, strategic price increases, and the effective expansion of digital channels. The company’s strong store performance is evident, with average restaurant sales climbing 7% year-over-year (y-o-y) to $3.2 million in FY 2024. Of the 304 new locations added in 2024, 257 included a Chipotlane, a drive-thru lane dedicated to digital orders, which played a significant role in margin improvements. By the end of 2024, Chipotle had expanded to more than 3,700 restaurants. If you’re looking for a diversified portfolio with lower risk than individual stocks, consider the High Quality portfolio, which has outperformed the S&P 500 with returns exceeding 91% since its inception.
Chipotle’s revenue rose 15% y-o-y to $11.3 billion in FY 2024, supported by a 7.4% increase in comparable-restaurant sales. This growth was fueled by a 5.3% rise in customer transactions and a 2.1% increase in average check size. Digital sales remained strong, contributing 35% to the core food and beverage business. Operating profit saw a 23% y-o-y increase, surpassing revenue growth due to margin expansion. The company’s operating margin increased by 110 basis points to 16.9% in FY 2024, leading to a 25% y-o-y jump in diluted earnings per share (EPS) to $1.11. Additionally, Chipotle’s global expansion is still in its infancy, with fewer than 50 locations across the U.K., France, and Germany, and a recent entry into Kuwait. The international success of brands like McDonald’s, which has over 40,000 locations worldwide, highlights the growth potential for Chipotle.
However, Chipotle experienced inconsistent sales in 2025, partially due to weather disruptions such as the Los Angeles wildfire. Despite solid underlying transaction trends and a strong business model, the company expects comparable sales growth to be in the low to mid-single digits for 2025. Plans for 315-345 new locations this year are in place, with over 80% expected to feature a Chipotlane. Going forward, competition from established fast-food players like McDonald’s (NYSE: MCD) and Domino’s may intensify, particularly in the drive-thru space.
The performance of CMG stock over the past four years has been volatile, with returns of 26% in 2021, -21% in 2022, 65% in 2023, and 32% in 2024. In contrast, the High Quality Portfolio, which consists of 30 stocks, has shown significantly lower volatility while outperforming the S&P 500. Why? The HQ Portfolio stocks have provided better returns with less risk than the benchmark index, resulting in a more stable investment experience, as reflected in the HQ Portfolio performance metrics.
We project Chipotle’s Revenues to reach $12.8 billion in FY 2025, representing a 12% y-o-y increase. As for earnings, we anticipate EPS to reach $1.32. Consequently, we have revised our valuation estimate for Chipotle’s Valuation to $60 per share, based on an expected EPS of $1.32 and a 45.7x price-to-earnings multiple for FY 2025, which is about 5% above the current market price as of January 10.
Chipotle has successfully expanded into smaller markets with populations under 40,000, supporting its long-term goal of reaching 7,000 locations in North America, up from approximately 3,500 today. Its European expansion is just beginning, with only 27 locations across the UK, France, and Germany, and a recent launch in Kuwait. McDonald’s massive global presence illustrates the potential international opportunities for Chipotle.
Want to compare Chipotle to its peers? Check out Chipotle’s Peers and explore more comparisons across industries at Peer Comparisons.
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