Here’s Why Chipotle Mexican Grill Stock Jumped 37% in the First Half of 2024

Shares of a restaurant chain specializing in burritos Chipotle Mexican Grill (NYSE: CMG) The company’s shares jumped 37% in the first half of 2024, according to data provided by S&P Global Market Intelligence. The chart shows a steady increase throughout the six-month period, accentuated by two larger single-day moves. These larger gains occurred each time the company reported quarterly financial results.

On February 6, Chipotle announced record revenue of $9.9 billion for 2023, which excited investors and sent its stock price soaring. During the year, the company opened a record 271 new locations. And locations open for at least 13 months saw a strong 8% increase in same-store sales.

On April 24, Chipotle reported its Q1 2024 results, which showed 14% year-over-year revenue growth. Sales were driven by 7% same-store sales growth and new restaurant openings. Menu prices increased, but that wasn’t the main factor driving sales. In fact, Chipotle saw 5% transaction growth, which was the biggest driver of its financial results.

In addition to these quarterly financial results, Chipotle’s stock price was driven higher for much of the first half of the year by the proposed 50-for-1 stock split. That proposal was made in March. And while it’s not a long-term fundamental to the stock price, it still excited investors, causing the stock to trend higher. On June 26, Chipotle’s stock price officially split.

It’s not just growth that matters, it’s profits

Restaurant stocks can benefit from operating leverage when sales volume per location increases, maximizing labor productivity and making the most of assets and equipment. Chipotle’s operating margin in the fourth quarter was 14.4%, compared to 13.6% in the year-ago period. And in the first quarter, its operating margin was 16.3%, compared to 15.5% in the same quarter of 2023.

In fact, over the past five years, Chipotle’s operating margin has more than doubled, leading to a dramatic increase in operating profit.

CMG (TTM) Revenue Data by YCharts

When revenues are growing at a healthy pace and profits are growing even faster, that often works out well for investors. And that’s what happened for Chipotle shareholders in the first half of 2024.

Long-term prospects are good

Since the split, Chipotle stock has pulled back a bit. To be fair, the stock’s valuation is at an all-time high, reflecting investor enthusiasm. It’s healthy to see the stock drop a bit.

However, the future looks extremely bright for Chipotle. As we’ve already noted, sales volume continues to climb, which is pushing its profit margins to impressive levels. The company has nearly 3,500 locations as of Q1. But it plans to have 7,000 someday.

Chipotle management plans to open a record number of restaurants this year, moving closer to that long-term goal, so the long-term growth outlook is solid.

Chipotle will release its financial results for the second quarter of 2024 on July 24 after the market closes.

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has a position in Chipotle Mexican Grill and recommends the company. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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