Don't Call It a Comeback

In this podcast, Motley Fool contributors Travis Hoium, Jon Quast, and Rachel Warren discuss:

• Chipotle's drop and falling same-store sales.
• Target's lost identity.
• Crocs' value.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

A full transcript is below.

This podcast was recorded on Dec. 10, 2025.

Travis Hoium: Some of the best known stocks of the last decade have fallen in 2025. Can they make a comeback? Motley Fool Money starts now. Welcome to Motley Fool Money. I'm Travis Hoium, joined today by Jon Quast and Rachel Warren. Today, we want to talk about comebacks and potential comebacks to some really well known companies Chipotle, Target, Crocs. Those are the three that are going to be on the tip of our tongue today. But there's a number of companies that fall into this category. Chipotle stock Johanna has fallen 51% from its high in 2024. Same store sales have gone negative. This is one of those companies that seemed indestructible since the whole Ecola thing early in the 2010. But things have really turned over the past year. Has something changed? I also want to note that the valuation is something that we should talk about because this is a company that is very well known, always been very highly valued, but it still trades for 30 times earnings. Is this the stock that you're looking at? Hey, you know what? Maybe this is a stock to come back in 2026, or is it still a little too uncertain?

Jon Quast: It's a good question, Travis and let's just start by saying that over the long-term, stock price is correlated with profits. Chipotle's profits are somewhat OK right now, but investors clearly believe that they're headed lower. In coming years. That's why this stock has fallen as much as it has. I think there's some credence to the fear that Chipotle's profits could fall so there's a little trend emerging. If you look over the last three quarters, Chipotle opened about 200 new locations. Average unit volumes have dropped about 3% over that time. That's actually pretty rare for Chipotle. Those average unit volumes, the sales per location per year, have gone up consistently over the last 20 years, let's say. Lower sales volume at a location is going to lead to lower profit margins. That's just how it works and accordingly, the restaurant level operating margin has fallen over the past year. Not a ton. It's still good, but it has dropped. You start looking at a company like Chipotle that has already scaled so much, almost 4,000 locations right now. It thinks that it can add 3,000 more, but are those next 3,000 locations going to be as high of sale volume, as high quality as the last 4,000? That's really the question. If it's adding a lot of underperforming new stores, then it does drag down the profits.

Travis Hoium: Jon, you follow a lot of the restaurant space, and at least a number of companies. Some of what we're seeing at Chipotle is across the board, so it's not hipole specific. How does that play into your calculus? Just, You know what? Maybe people are eating out less. Maybe fast casual is getting more saturated overall. Is that something that will just go, You know what? Maybe I'm interested but not over a certain price, or how does that play into how you're thinking about the potential comeback of Chipotle?

Jon Quast: I think it's a little bit dismissive to say that people aren't eating out as much. There's definitely some shifts happening in the market. We're seeing some casual dining, some of those more family oriented casual dining chains doing a little bit better than they have in times past. It seems like there's some shifts happening. But I will say with Chipotle, one of the interesting things is it's in a very strong financial position, and that makes it very hard to count it out. You look at it's still earned 1.5 billion in net income over the past year. It has 1.8 billion in cash and investments, no debt other than its lease liabilities. It's still in a great position that it can pivot the business as it needs to, and it can still give cash back to shareholders. I'd be very hesitant to say Chipotle's best days are over.

Travis Hoium: Rachel, there are things that restaurants can do to goose those same store sales. Jon brought up the number of restaurants that they're opening always seems to be a push and a pull. If you're having negative same store sales, do you want to open another 200 stores because could you just be cannibalizing yourself. But they're also talking about innovation in the menu. They've done a little bit of that recently. I've tried some of their new menu items. They've been hit or miss. But what are the catalysts that you're looking at potentially for a company like Chipotle, if there is a comeback?

Rachael Warren: I do think that there's a comeback here, so as not to bury the lead. I think a lot of this what we're seeing with Chipotle, and I will note, also across the quick service restaurant space, a lot of it is a function of some of the dynamics we're seeing in the macro environment. You're right, Chipotle, they're heavily investing in menu innovation. They found success with a lot of the limited time offerings that they've introduced. They've said, guests who purchase those limited time offer tend to return more frequently. But I think it's important to take a little bit more of a holistic look at what's going on with Chipotle specifically. Interesting fact, about 40% of Chipotle sales come from households that are earning under 100,000 annually. This is a really core demographic for them. This is also a demographic that's facing inflationary pressures, economic pressures. We're seeing that cohort tend to reduce dining frequency. They're choosing to eat at home more often instead of switching to competitors. This is where you've seen a real decline in customer traffic for Chipotle throughout 2025. Chipotle has intentionally held back on fully offsetting inflation with price increases. That's also where we're seeing margin compression compared to some of their peers who maybe have raised their prices more aggressively. But digital sales are a really powerful growth tailwind for Chipotle. No, their long term growth strategy remains intact. They're planning to open anywhere 350-370 new restaurants in 2026 alone, and they're also really focusing on their international expansion in Europe in the Middle East, across Asia. They are accelerating that move through various partnerships they have. I think that at its core, this is still a business that is also very strong financially. The boards authorized an additional $1.8 billion in share repurchases as well. I think that's a real sign of confidence that their long-term outlook as well as their intended value to shareholders holds. This is still a profitable business. Yes, they're seeing decreases in comparable restaurant sales. I think a lot of that is a function of these factors I've mentioned. This is really very much a strong business that's dealing with cyclical headwinds, not so much structural issues. I think that maybe its current valuation could pose a really interesting value proposition to long-term investors.

Travis Hoium: Jon, let's talk about that valuation because one of the things you look back on Chipotle never been a particularly cheap stock. I look back on the history, there's not really this moment where, you know what you could have bought Chipotle at ten times earnings or 12 times earnings. It has always traded for a pretty high price to earnings multiple. If you just go back to the middle of 2024, the price to earnings multiple was 70. Now it's down to about 30 is this just a cautionary tale of, You know what? By a great company, but price does matter at the end of the day.

Jon Quast: Price does matter, in particular, the bigger that the company gets and the lower the long-term growth prospects become.

Travis Hoium: It's different paying a 70 PE multiple for a company with 100 restaurants that could grow to 1,000 versus 1,000 restaurants, and maybe it can grow to 2000 or 3,000. Is that the way? It's a difference of scale.

Jon Quast: Absolutely. To quote the great Warren Buffett, growth is a component of value. If you're going to calculate what is a good valuation for a company, you need to also be able to calculate what are the realistic growth prospects. When you have a small company, growth is going to be a lot easier than a large company looking to do the same thing.

Travis Hoium: When we come back, we're going to talk about a stock that is pretty cheap on a price to earnings basis, but maybe doesn't have the same growth opportunity. That is target. You're listening to Motley Fool Money.

Welcome back to Motley Fool Money. Rachel, Target stock is down 46% over the past five years. It's fallen out of favor with investors and shoppers alike. Some of the Same Star sales comps a little bit sometimes it's negative a little bit, sometimes they're a little bit positive. But overall, just nothing really impressive going on at Target. But the stock trades for 11 times earnings. Is there hope for a bounce back here?

Rachael Warren: I think there is. You make a good point. Tarket's performance as a business financially the last few years has certainly been nothing to write home about, and that's been true for the stock as well. As it's now trading at this very low forward PE ratio of around 11, I want to stress, I don't think that this is a value trap. This is still a company that maintains very robust fundamentals. They have an A credit rating. They have just a little under 5 billion in cash. Importantly, they have a very well funded and growing dividend with 53 years accounting of consecutive increases. I think that does underscore its financial stability despite current struggles. Now, I think very differently from the other business we've talked about today, Chipotle. Obviously, this is a different industry. Target struggles, some of them have been related to the macro environment, but a lot of them have been very specific to the company. There's been a lot of consumer backlash over various policies. They've really struggled to retain a solid share of non discretionary spend. You've got a lot of consumers going to rivals like Walmart. This has all created, I think, a bit of a perfect storm for target.

Now, we have a new CEO coming in, Michael Fidelki. He's a long time veteran at the company. He officially takes the role in February of 2026. Under his leadership, I think Target really plans to implement what we're seeing is a multi year plan on reinvigorating their private label brands, some of their key discretionary categories like toys and sporting goods. Target's already trying to really invest heavily in story models. They've been leveraging, various AI powered tools for personalized shopping. Management is confident in their plan. They want to regain market share. They're planning to drive over $15 billion in revenue growth over the next five years. I think that's possible, but I think that there's a major shift that needs to happen in the business in the next few years for that to happen. A lot of the drag on their performance has been the shift in consumer spending. There's still a profitable business, but those sales declines are really dragging overall. I think how they manage inventory efficiently, how they manage some of these AI powered tools, how they're able to resonate with consumers in the next few years is really going to be key to that turnaround.

Travis Hoium: You brought up Fidelki coming in as CEO and the changes that could potentially happen, but Fidelki was the CEO before. Everything that has happened in the last five years, his fingerprints are all over it. Do you think there's actually going to be any meaningful change in the right direction, or is this just going to be more of the same?

Rachael Warren: I don't think it's going to be more of the same. I do think there's some very specific changes he wants to implement once he's officially in the CEO role. But I think that there is and should be a healthy level of questioning from investors of what this is going to look like moving forward. I think if you're an investor that's looking for a well funded dividend, maybe this is a business that's intriguing. But certainly, lagging behind its peers like Walmart and many others. We talked about a few weeks ago how Target wasn't exactly forecasting generous growth expectations for the Black Friday season, which as we know, is a really key growth area for a lot of retailers. I think how they implement these changes in the next few years going to be key. I think there's still a lot of questions about what that's going to look like.

Travis Hoium: Jon, when you look at a company like Target, it seems like there's opportunities. You got that high dividend, but is there also potential risk there because of that valuation? The market is telling us something.

Jon Quast: Absolutely. When you have a dividend king, such as Target, having a all time high dividend yield of about 5%. The market is saying we don't buy this. We do not believe that this company is going to continue to grow profits and continue to increase that dividend. The market, a high percentage of investors are doubting that potential. I'm going to disagree kindly with Rachel here, because I think that the problem here is it almost sounds like they are doubling down on what's not working. When I hear about remodel, when I hear about private label, which they already have private label. It's not like they're launching a new private label. This is doubling down on what's not working. When you promote the COO to the CEO, you're doubling down on it. Maybe it works. Maybe it does work. Maybe this is the correct direction from for the company. But it does sound like, hey, we're going to keep moving forward in futility here. I understand why the market doubts it. Now, I am a broken record, and I'll say it again. I do believe that the company has a path forward to driving sales growth and improving its profit margins, specifically it's digital businesses. The third party marketplace that it is curating, it's digital advertising. These are things that are growing at Target, and they do have the potential to help out the financials of the company. However, they are predicated on the stabilization of the core retail operations. It is very important that Target gets it figured out, stabilizes that. They're in a weird place in the mine share of the consumer. Are we upscale? Are we discount? Nobody knows. There are some things to work out. I don't necessarily feel like it made the best choices here right now, but it's not a lost cause.

Travis Hoium: Jon, final answer. Can Target make a comeback?

Jon Quast: I think it can. I think that the target stock price has already hit its low point.

Travis Hoium: Rachel, what do you think?

Rachael Warren: I agree with Jon. I do think they could make a comeback how they executes key, though. This is a stock I'm watching with, I think, a fair amount of caution, a lot of investors right now.

Travis Hoium: At least the risk is a little bit lower with a priced earnings multiple that's getting very close to single digits.

Rachael Warren: Very true.

Rachael Warren: When we come back, we're going to talk about one of Jon's favorite stacks. That is Crocs. You're listening to My for Money.

Welcome back to Motley Fool Money. Another company that I'm looking at as a potential comeback play in 2026 is Crocs. Look, I have counted these shoes out over and over again over the past decade, but they seem to keep coming back. Jon, the stock is down 23% just over the past year, and shares are trading for just seven times forward earnings estimates. Can Crocs make a comeback?

Jon Quast: Of these three companies that we're talking about, I believe that Crocks has the clearest path toward a comeback because it also has the clearest explanation of what has gone wrong. Let me summarize it as quickly as I can. In 2022, Crocs bought another shoe company called Hey Dude. Sales growth was amazing for a period of time. Then rock management overestimated the growth potential for Hey Dude, and it stuffed the wholesale channels full of Hey Dude merchandise. Then Sales growth stalled, and now the company has had to work through bloated inventory at wholesale channels, and that is hurting both sales and profit margins, and it had to take a good will impairment charge, a significant one recently, too.

Travis Hoium: That's basically them saying, Oops, we overpaid for this company.

Jon Quast: Buy a lot. It took on debt to acquire Hey Dude. It's been paying that back down. All of these things have been weighing on Crocs financials for multiple years now. But you look at it, and the Crocs brand itself is still growing internationally. It's taken a breather in domestic markets. But they're down slightly, sales overall, but it's nothing troubling. The margins are still really good. The valuation is incredibly cheap, as you point out, Travis, less than seven times its free cash flow. As you look at what it does with its profits, it's repurchasing shares. The share account is down about 16% over the last three years. It's doing shareholder friendly things with its ongoing profits, and you put it all together, and I believe Crocs does have a comeback in store, and I think it's a market beater over the next five years.

Travis Hoium: Rachel fashion is always hard. Our crocs, for example, going to be in fashion. Every time I write something about crocs, I always hear, You know what? Kids aren't wearing crocks anymore. Then I go look at the kids walking to the elementary school near me, and everybody's wearing crocs. It just seems to be, You know what? Maybe in one city, they're not popular in another city they are. It makes it really hard to follow some of these companies.

Rachael Warren: I will note with Crocs, they have had their fair share of rebrands over the years. They nearly went bankrupt following the 2008 financial crisis. They successfully restructured their operations. They began what they called their chic comeback era around 2016. This was because they basically entered into a range of different high profile collaborations with various fashion designers Blinciaga Christopher Cane. They did collabs with celebrities like Justin Bieber, Post Malone.

Travis Hoium: You have some really interesting collaborations, and I have never did any of those shoes appealing, so don't it would appartly.

Rachael Warren: It's a very specific type of style. They've also done collaborations with various food brands. I think there was a KFC pair of crocks, guys. All across the map. But going into the pandemic, they definitely were growing again as a business. Obviously, the pandemic era revitalized the growth of crock. I think with so many people staying at home for long periods, the idea of a comfortable foam clog that you could wear both inside and out was something that resonated with consumers, I do think that's something that also really goes back to the strategy we've seen under CEO Andrew Reese, really going back to core and original products, that the company was known for its very early days. Jon mentioned the difficulties they've had with Hey Dude. They've been working to really manage that excess inventory. Rock like many other companies in the space, they've been dealing with the impact of tariffs on goods it's a competitive market. There's also now the introduction of tariffs that are compressing margins. I will note is that while we've seen a decline in North American sales, Croc has seen really strong double digit growth in some of their newer international markets, China, Western Europe. That's been really interesting to see. That's partially offsetting some of the domestic softness. They do maintain compared to the broader industry, pretty strong margins. They've been really trying to actively manage their capital structure, and they are still the number one footwear brand on TikTok shop in the US. There seems to be a way in which this is resonating with the newest generation of shoppers. I wouldn't count Crock out.

Travis Hoium: Do you think that Crocs is going to make a comeback? I think Jon is a hard yes. But do you think that 2026, this is a comeback stock?

Rachael Warren: I'm a maybe. I maybe not as optimistic as Jon, but I like the business. I'd like to see them succeed.

Travis Hoium: Final question for the two of you. Do you own any Crocs?

Rachael Warren: I don't currently, but I used to have a few pairs.

Travis Hoium: Jon?

Jon Quast: You mean the shoes. I thought you meant the stock. I do not personally own any Crocs shoes. However, there are several pairs of Crocs shoes in the Quast household.

Travis Hoium: We are the same. I also own shares of rock's stock because my kids love it. I'm not a rock buyer, but I have spent plenty of money on Crocs for those kids. As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows the Motley Fool's editorial standards, and it's not approved by advertisers. Advertisements are sponsored content provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For Rachel Warren, Jon Quast, I Boyd, behind the glass, and the entire Motley Fool team, I'm Travis Hoium. Thanks for listening to Motley Fool money. We'll see you here tomorrow.

Jon Quast has positions in Crocs. Rachel Warren has no position in any of the stocks mentioned. Travis Hoium has positions in Crocs. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Target. The Motley Fool recommends Crocs and recommends the following options: short December 2025 $45 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.