Chipotle Stock Under $45: Golden Opportunity or Value Trap?
Key Points
Chipotle's current price-to-earnings ratio is close to a 10-year low.
Despite same-store sales weakness, opening new locations will lead to higher earnings in the future.
- 10 stocks we like better than Chipotle Mexican Grill ›
Chipotle Mexican Grill (NYSE: CMG) used to be a favorite among the investment community. The Tex-Mex restaurant chain's stock price was up 368% in the five years leading up to its peak in June 2024. Today, however, it trades 44% off that record high, as slower sales growth hurt market sentiment.
Shares trade at well under $45 right now. Does Chipotle present a golden opportunity for investors, or is this a value trap?
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Take a bite out of this burrito
Chipotle shares are currently trading at a price-to-earnings (P/E) ratio of 34. That might look expensive, but it's close to the cheapest valuation multiple in the last decade. The stock's average P/E ratio since January 2016 is 82.9. That's one reason why this is a golden opportunity.
Earnings should be much higher in the future
The company's same-store sales have been under pressure in recent quarters due to tighter consumer spending, which is impacting traffic at its restaurants.
Despite this temporary headwind, Chipotle is setting itself up to produce much higher profits in the future. After opening a projected 330 net new stores (at the midpoint of management's guidance) in 2025, the business plans to expand the footprint by another 350 to 370 locations this year. Executives believe there will be 7,000 Chipotle restaurants total in the U.S. and Canada in the long run (compared to 3,916 overall as of Sept. 30).
It will take some patience from investors, but Chipotle could be a winning stock over the next five years.
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Neil Patel 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.
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