Is Chipotle Stock a Long-Term Buy?

Until 2025, Chipotle Mexican Grill (NYSE: CMG) had about as good a run as any stock in its industry. From 2020 through 2024, it had an average annualized return of about 29%, as its chain of restaurants boomed.

The company had 2,622 restaurants at the end of 2019 and by the end of 2024, it had grown by more than 1,000 to 3,726.

But 2025 was a setback for the fast food chain as the stock price tanked some 38%, from around $60 per share at the end of 2024 to $37 per share at the end of 2025. It is currently trading at about $35 per share, down about 6% year to date (YTD).

Can Chipotle turn things around?

Image source: Getty Images.

First same-store sales decline in 10 years

After years of strong growth, Chipotle hit a wall in 2025 as inflation, mainly in the form of higher prices for beef and other ingredients, cut into its margins. Tariffs also had an effect on some ingredients and packaging.

At the same time, store traffic and same-store sales slowed, as more people chose to eat at home due to inflationary prices and economic concerns.

For the full fiscal year, same-store sales decreased 1.7%, the first time that's happened since 2016. Also, overall store traffic, as measured by restaurant transactions, dropped 2.5% last year.

In addition, investors were disappointed to learn that same-store sales are projected to be flat in 2026. However, the chain is planning to open 350 to 370 new restaurants this year, which is more than the 334 that opened last year.

Recipe for growth

To turn things around, Chipotle management rolled out a five-point "Recipe for Growth" strategy in February to increase profits. In summary, the strategy involves several initiatives, including menu innovation, brand messaging, leveraging artificial intelligence, relaunching the rewards program, expanding globally into new markets, and focusing on speed and agility.

CEO Scott Boatwright said the strategy is designed to increase transactions and set Chipotle up for long-term success.

It is a reset for Chipotle in more ways than one. Because of the success the chain had enjoyed during the 2020s growth spurt, the stock's valuation had soared to unsustainable levels. It had been trading at round 56 times earnings at the end of 2024.

It is now back down to a more reasonable price/earnings (P/E) ratio of 30, which is still a bit high, considering the company's conservative growth outlook for 2026.

Given the potential for more macroeconomic headwinds in 2026, along with elevated inflation and heightened competition, it could be a difficult year for Chipotle to gain much traction on its new growth strategy.

While Chipotle still has solid long-term potential, I wouldn't be shocked to see the stock move a little lower this year as it is still trading at a high multiple given its growth projections for this year.

I would probably monitor Chipotle's growth for another quarter, perhaps looking for an opportunity to buy a little lower than the current valuation with the expectation that the earnings begin to resurge in 2027.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends the following options: short March 2026 $42.50 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.