- Chipotle continues to be one of the top-performing restaurant stocks this year, up nearly 60% year-to-date.
- The company just came off another exceptional quarter with 14% sales growth year over year, and remains one of the few restaurant names that posted sales growth in Q3.
- However, while the Chipotle story is stronger than ever with strong margins and massive earnings growth ahead, the valuation continues to leave a lot to be desired.
- Therefore, I see no reason to chase the stock, and I would view further strength above $1,400 as an opportunity to book some profits.
It’s been a rough year for the restaurant sector, but Chipotle (CMG) has managed to steer clear of the carnage and has put up an incredible return year-to-date. In fact, despite hailing from one of the worst-performing industries, Chipotle has more than tripled the return of the S&P 500 (SPY) with a 59% return year-to-date. Following the positive news, it is now sitting on the doorstep of another new all-time high. The massive outperformance is attributed to the company’s significant digital footprint, which has allowed it to put up record sales in Q3 while many restaurants continue to suffer from lower demand due to the global pandemic. However, at a valuation of nearly 5.5 forward sales, the stock remains quite e
Chipotle released its Q3 results in late October and reported sales of ~$1.60 billion and comparable restaurant sales up 8.3% – outstanding results for a company still battling the headwinds of a global pandemic. This sales figure translated to an incredible 14% growth year over year, and comparable restaurant sales are now sitting at a 20.2% two-year stack, making it one of the strongest growth stories in the restaurant industry next to Wingstop (WING). Like Wingstop, Chipotle continues to benefit from its loyalty program and massive digital footprint, with digital sales up 202% year over year, making up 49% of total sales. This is what’s allowed the company to continue to drive sales while many partially dine-in restaurants are still running at limited capacity or are closed, and it’s clear that Chipotle’s customers’ demand for its products has not wavered during the pandemic. Let’s take a closer look at the results below:
