Chipotle Stock Plunges 37%: Is This Your Ultimate Buying Opportunity?

Chipotle's stock just cratered—down a staggering 37% from recent highs. Investors are scrambling, analysts are sweating, and the burrito chain's future suddenly looks spicier than its hottest salsa.

Market Meltdown or Overreaction?

The numbers don't lie: a 37% drop screams panic. But is this a fundamental breakdown or just Wall Street's latest tantrum? Chipotle's core business still feeds millions daily—digital orders are booming, and store expansion hasn't slowed. Yet the stock got grilled anyway.

Burrito Economics 101

Restaurant stocks always dance to a volatile beat. Labor costs rise, avocado prices swing, and consumers get fussy. Chipotle's dip might just be the sector's usual drama—amplified by trigger-happy algorithms and skittish institutional money. Because nothing says 'rational market' like panicking over a guac shortage.

Bottom Line: Feast or Famine?

Buy the dip? Or avoid the hype? Chipotle's brand power remains intact, but the stock's plunge signals real fear. Either this is a golden chance to grab shares at a discount—or proof that even cult stocks can't defy gravity forever. Your move, bulls.

Image source: Getty Images.

Losing customer traffic

Either due to macroeconomic factors or losing customer loyalty, Chipotle's store traffic declined last quarter, causing its per-restaurant revenue -- what's known as comparable store sales growth -- to decline 4% year over year. This is a huge change from Chipotle's post-pandemic same-store sales growth, which has ranged from positive 5% to 10% depending on the quarter.

One quarter of weak traffic is not the end of the world for a restaurant brand, but it is indicative of changing customer habits. After years of dominating market share gains, the fast-casual category has hit a speed bump and lost share to traditional fast food and casual dining brands, which are posting better traffic and comparable store figures than Chipotle.

What's more, for years shoppers in the United States have shifted from spending money on groceries to spending money at restaurants on pre-made food away from home. This trend has stalled due to inflation in recent quarters. A confluence of factors may have finally caused Chipotle to hit a growth wall. Now, its profit margins have begun to decline, as its comparable store sales growth is declining while input costs like food and labor are increasing due to inflation.

International expansion plans

Investors should keep a close eye on Chipotle's same-store sales figures. The metric may struggle for a few quarters due to macroeconomic factors, but it should -- and needs to -- recover eventually to help Chipotle get back to earnings growth.

As long as same-store sales growth recovers, what matters most for Chipotle over the long run is expanding the store count. Management believes it can eventually hit 7,000 stores in North America, which it is well over halfway to achieving. In the longer term, it plans to bring the Chipotle brand to new regions around the world. This includes Western Europe, the Middle East, and a new location in Mexico starting this year. One Mexican location is not going to revolutionize Chipotle's financials, but if an American-Mexican restaurant chain can succeed in Mexico, it can likely succeed in any country.

Pure global expansion could unlock a huge runway for Chipotle to keep growing in the years to come. Assuming its average restaurant volume can grow from $3.1 million to $3.5 million, 10,000 restaurants WOULD equate to $35 billion in annual sales for the brand, or more than 3x today's levels.

CMG Revenue (TTM) data by YCharts.

Is Chipotle a can't-miss stock?

Chipotle trades at a market cap of $58 billion and a price-to-earnings ratio (P/E) of 38.5, which is not overly cheap even after this recent drawdown.

Assuming that the brand can maintain a 15% net income margin, Chipotle will eventually hit $5.25 billion in net income if annual sales through its locations hit my estimate of $35 billion. This will likely take 10 to 15 years to achieve, if not longer.

$5.25 billion in earnings would bring Chipotle's P/E ratio down to around 10, which is a cheap level for a high-quality restaurant concept that has historically managed to grow at or above inflation. However, that P/E ratio will not arrive for many years, which should keep investors nervous about buying the stock. Despite this latest stock drop, Chipotle is not a home-run buy for investors at today's stock price.