What to look out for ahead of Chipotle’s Q2 results
As Chipotle’s stock edges past all-time highs, whether it can satisfy investors’ lofty expectations will be a key focus when the company reports its second quarter results on 23 July.
Chipotle Mexican Grill Inc is expected to report its second quarter (Q2) results on 23 July, after the market close.
Analysts remain cautious
Impressive Q1 figures which saw Chipotle deliver double-digit revenue growth and a 100.7% increase in digital sales have seen lofty growth expectations attached to the company. Year-to-date, Chipotle’s stock price has risen 71%.
Nevertheless, according to the Wall Street Journal, analysts remain mixed on the company’s outlook, with a consensus hold rating on the stock.
Chipotle goes digital
A stand out for Chipotle in recent times has been the company’s strategic focus on digitising the restaurant experience. With revenue from digital sales more than doubling during Q1 – and accounting for 15.7% of sales – investors will be looking to see if the company can maintain such incredible momentum in Q2 and beyond.
Besides the company’s new-found digital focus, Chipotle is projecting the total number of new restaurant openings to be between 140 to 155 for the current financial year.
Given that the company has only opened 15 new restaurants so far in 2019’s financial year, investors will likely be keen to see an uptick in this metric during the upcoming Q2 release.
Management’s turnaround
Following up on comparable restaurant sales growth of 9.9% during Q1, the company is now expecting ‘mid to high single digit comparable restaurant sales growth, up from the prior mid-single digit growth expectation’ for the 2019 financial year.
As Chipotle’s chief executive officer (CEO), Brian Niccol pointed out:
‘The ongoing improvement in each of our key operating metrics over the past few quarters gives us confidence that our mission to win today and cultivate the future, is resonating.’
High valuation, high expectations
These ongoing improvements have led investors to bid Chipotle’s stock to record highs in recent times. Currently, Chipotle Mexican Grill Inc trades at a heady price-to-earnings (P/E) ratio of 124, compared to the more modest 22.4 P/E ratio of the S&P 500.
Ultimately, while Chipotle’s digital initiative has reignited the company’s growth story – with such a steep P/E ratio, the potential for disappointment remains high if the company’s Q2 earnings fail to meet investors’ elevated expectations.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only
