Here’s what you should be buying at Chipotle

chipotle

NEW YORK — Forget buying burritos and tacos at Chipotle, purchase the company’s stock.

Chipotle shares soared nearly 11 percent in premarket trading Tuesday, a day after the restaurant chain released a blockbuster quarterly report. Despite raising prices, customers are still lining up for more.

The Denver-based burrito maker said it earned $3.50 per share in the second quarter. It was expected to have made $3.09 per share, according to estimates from FactSet. That’s “hot, hot, hot” on Wall Street.

Chipotle shares jumped over 8 percent in extended trading, rising to a new all-time high above $640 (in other words, the stock now costs as much as roughly 80 burritos).

The results come after Chipotle announced plans in April to hike menu prices for the first time in three years.

Like many companies in the food industry, Chipotle has been paying higher prices for key ingredients. Specifically, prices for steak, cheese and avocados have all risen sharply this year due to bad weather in many parts of the country.

Yet burrito lovers digested the price hikes without missing a bite.

Revenue rose 28 percent to $1.05 billion, surpassing analysts’ estimates, as higher prices boosted the top line.

The price hikes also haven’t taken a toll on store traffic. Same-store sales, a key measure of growth, increased 17 percent in the second quarter. That was one of the strongest quarterly sales rates in Chipotle’s history as a public company, according to CEO Steve Ells.

Looking ahead, Chipotle expects “mid-teen” sales growth for the full year.

Chipotle has been expanding rapidly since it spun off from McDonald’s in 2006. With $3.2 billion in sales last year, it ranks as the nation’s biggest “fast-casual” Mexican food chain, according to Morningstar.

It opened 45 new locations in the second quarter, bringing its total to 1,681. For the full year, Chipotle expects to open up to 195 new restaurants.

Analysts say Chipotle has benefited from increased demand for healthier fast-food that is less expensive than what is available at traditional sit-down restaurants. Chipotle is now experimenting with other food “concepts,” such as ShopHouse Southeast Asian Kitchen and Pizzeria Locale, as well as catering services.

Burritos have been a hit with investors too. While the stock took a tumble in April, it’s still up more than 10% this year.

Investors may soon have another way to play the growing popularity of Mexican-style fast food. El Pollo Loco, a California-based chain specializing in grilled chicken, is expected to list its stock in an initial public offering this week.

The burrito boom also seems to be taking hold in Europe. Chilango, which operates 7 locations in London, has raised nearly £1.3 million by selling so-called “burrito bonds” via a crowd funding website.

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Filed in: News

4 comments

  • JT

    Good food, great locations, and they prohibit the “open carry” psychopaths from bringing AK-47’s into their restaurant chains. All the more reason to buy stock in this chain!

    • GC

      They don’t just prohibit open carry, they also prohibit those of us who legally carry concealed, which is the reason that I will never give my business to Chipotles. There are too many other good restaurants out there who respect my legal rights. Also, there are those who open carry rifles and give a bad image to all who open carry, but the vast majority of those who open carry are doing so with a defensive handgun, and doing it very unobtrusively.

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