Think it’s too late to buy Chipotle stock? Here’s the biggest reason there’s still time
The company expects to double its presence in North America to 7,000 locations.
At first glance, one might easily assume that they have missed the boat with Chipotle (CMG 2.26%). The fast-casual restaurant chain saw a steep rise after announcing its 50-for-1 stock split. Moreover, the stock has risen more than 120-fold since its IPO in 2006, at a split-adjusted price of $0.44 per share.
However, the presence of over 3,500 stores probably doesn’t mean the stock is still growing. Here’s how investors can still profit despite the chain’s massive growth.
Why Chipotle
Chipotle has emerged as a successful pioneer of a healthy fast food concept. The company figured out how to offer delicious, inexpensive, naturally produced fast food, a concept that most other chains have had little success with.
Another advantage is that Chipotle is successful in areas with fewer than 40,000 residents, allowing the company to meet its expectations and expand to 7,000 locations in North America alone.
What’s more, the company hasn’t had to sacrifice growth to achieve this goal. In the second quarter of 2024, the company announced that it had opened 262 restaurants in the past twelve months. This means that at the current growth rate, it will take several more years to reach 7,000 locations.
Moreover, the strong financials indicate continued prosperity. In the first half of 2024, revenue increased 16% to $5.7 billion. Comparable sales also increased 7% in the first quarter and 11% in the second quarter, suggesting that growth is sustained in a sluggish economy. Such an increase translated to net income of $815 million in the first two quarters of 2024, a 29% year-over-year increase.
After all, the European growth story has only just begun. So far there are only 27 locations in Great Britain, France and Germany. Nevertheless McDonald’s operates over 40,000 locations worldwide, demonstrating how far a restaurant stock can go through international success.
Ultimately, Chipotle has come a long way, but given its comparable-store sales growth, expanding footprint, and international prospects, Chipotle may have only just begun to realize its full potential.
Will Healy does not own any stocks mentioned. The Motley Fool owns and recommends Chipotle Mexican Grill. The Motley Fool recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
