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Here's Why Chipotle Stock Is Rocketing Higher This Week

By Danny Vena – Jul 23, 2021 at 5:15AM

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The burrito-slinger is back.

What happened

Investors in Chipotle (CMG -1.29%) are getting a tasty treat this week. The stock for the fast-casual burrito maker has gained as much as 15.8% so far this week, and shares were up 15.3% at the close today.

Investors cheered as the company reported second-quarter financial results that not only topped expectations, but also exceeded pre-pandemic levels. The stock notched a new all-time high on Thursday, closing out the trading day a whisper below that watermark.

Two smiling Chipotle workers preparing food.

Image source: Chipotle.

So what

Chipotle generated revenue of $1.89 billion, up 38.7% year over year. Contributing to the robust results were digital sales that grew 10.5% and accounted for 49% of total sales. This helped drive comparable-restaurant sales up 31%, though the hurdle was easier to clear due to pandemic-related restrictions last year when restaurants were handcuffed and relied almost solely on takeout and delivery. 

The company reported restaurant-level operating margins that jumped to 24.5%, achieving its highest level in nearly six years, and that resulted in record operating profit. Excluding one-time charges, this pushed earnings per share to $7.46, easily eclipsing analysts' consensus estimates of $6.52.  

Now what

During the earnings call with analysts, CEO Brian Niccol noted that Chipotle "hung on to 80% of our digital sales, and we're seeing about 70% of our dining room sales recaptured," with total sales returning to pre-COVID levels. He also noted that there's about 15% overlap, with consumers using both channels, which could lead to even more incremental sales. 

If the recovery continues, management expects comps growth in the low to mid double digits, suggesting the best could be yet to come for Chipotle. 

Danny Vena owns shares of Chipotle Mexican Grill. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

Stocks Mentioned

Chipotle Mexican Grill Stock Quote
Chipotle Mexican Grill
CMG
$1,604.88 (-1.29%) $-20.95

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