Entering 2024, Chipotle Mexican Grill (NYSE:CMG) stock remains a best-in-class restaurant stock with plenty of growth ahead of it. Investors who take a position now are sure to be rewarded with strong gains.
The last year was a typically strong one for CMG stock, with the share price having gained more than 45%. Chipotle continues to outperform the market, rewarding its shareholders with a nearly 350% return over the past five years. Looking ahead, there’s no reason to think Chipotle will slow down anytime soon.
Continued Growth for CMG Stock
Chipotle Mexican Grill’s same-store sales rose 5% in the third quarter of 2023, which is the company’s most recent earnings report. That same-store sales growth beat Wall Street forecasts of 4.6%. The company attributed the strong Q3 same-store sales to more transactions and higher menu prices.
In October of last year, Chipotle raised its menu prices for the first time in more than a year, citing rising food inflation as the reason. The higher menu prices are helping to fuel growth.
The company also continues to open new restaurant locations at a brisk clip. During Q3, Chipotle opened 62 new locations, all but eight of which feature a drive-thru lane reserved for picking up digital orders.
Management plans to open up to 315 new restaurants this year, the most since before the COVID-19 pandemic. They also reiterated a forecast for 2023 same-store sales growth in the mid-to-high single digits.
Strong Financial Results
The continued focus on growth is being reflected in the balance sheet at Chipotle Mexican Grill. The company consistently reports strong financial results that beat the forecasts on Wall Street. For Q3 2023, Chipotle reported earnings per share of $11.36, which was ahead of the $10.55 consensus expectation of analysts.
Revenue totaled $2.47 billion, which matched analysts’ forecasts. The company noted that its input costs rose in Q3, with higher prices for beef and other products.
However, Chipotle executives stressed they offset the higher input costs with higher prices charged for their burritos and other menu items.
Chipotle’s prices were up 2.8% in Q3 compared with a year earlier. Management remains confident that the restaurant chain has pricing power, or the ability to raise prices without losing customers. Chipotle is scheduled is to report its Q4 2023 financial results on Feb. 6.
Gaining Market Share
With its focus on Mexican cuisine and emphasis on fresh ingredients, Chipotle Mexican Grill occupies a unique place in the fast-casual dining sector. The company’s principal competitors are Moe’s Southwest Grill and Baja Fresh Mexican Grill, as well as market leader Taco Bell.
However, none of its competitors have grown as quickly or gained market share as fast as Chipotle. In 1998, five years after its founding, Chipotle had only 16 restaurant locations. By 2006, that number had ballooned to 500 locations. Today, Chipotle has 3,200 outlets, and counting.
Yet even with the explosive growth, Chipotle still has a long runway ahead of it. Today, the company is the 26th largest restaurant chain in the U.S. based number of outlets. It ranks 13th in terms of sales.
Chipotle is now branching out beyond the U.S., moving into new markets such as Canada, France, Germany and the United Kingdom; there appears to be no shortage of growth opportunities.
It’s also worth noting that, in terms of its stock, only McDonald’s (NYSE:MCD) currently has a bigger market capitalization than Chipotle.
Buy CMG Stock For Future Gains
Add it all up, and Chipotle looks like a winning bet. The company’s niche focus on Mexican cuisine is popular, growing rapidly, with strong earnings and a profitable stock.
With the Covid-19 pandemic behind us and the economy remaining strong, there’s every reason to expect Chipotle Mexican Grill to have another great year in 2024. CMG stock is a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
