Please ensure Javascript is enabled for purposes of website accessibility

Why Chipotle Mexican Grill Stock Climbed 17% in March

By John Ballard – Apr 6, 2019 at 4:35PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Digital ordering and new marketing efforts are helping the company return to growth mode.

What happened

Shares of Chipotle Mexican Grill (CMG -0.51%) gained 16.92% in value last month, according to data from S&P Global Market Intelligence.

To be clear, there wasn't any company-specific news to explain the jump in stock price. What seems to be sending shares higher is increasing investor optimism about Chipotle's growth prospects after a better-than-expected fourth-quarter earnings report in early February.

Chipotle stock also got an upgrade from one analyst in March, citing continued strong comparable-store sales trends through the first quarter based on channel checks. 

An overhead view of a burrito bowl sitting on a wooden table.


So what

Chipotle seems to have completed its turnaround after the mess it got itself in a few years ago over food safey issues. In the last quarter, comparable-store sales showed a significant improvement, up 6.1%, compared with just 0.9% in the year-ago quarter. 

The recent performance is particularly encouraging, given the increasing competition in the restaurant industry as consumers are getting more selective and digital delivery is providing more options.

Management has made strides building its "culturally relevant" brand image by using social media and traditional media channels. Chipotle received 20% more digital impressions in 2018 without increasing marketing expense. 

Now what

With more consumers getting more picky about the food they eat, Chipotle's brand, which is centered on "great taste and real ingredients," should help the restaurant chain distinguish itself in a crowded market.

Investors should keep their eye on digital sales, which accelerated in growth last quarter to 66% year over year and made up 10.9% of total revenue. Management is focused in the short term on continuing to roll out digital ordering and pickup in more restaurants to remove friction and reduce time in the ordering process, which should have a big impact on sales performance. 

John Ballard has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.