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Chipotle stock nears record high on new menu servings

By Staff Correspondent |

Chipotle Mexican Grill (NYSE: CMG) stock opened higher but changed course to the negative territory in the early trade on Tuesday. The shares are lately trading near the record high as investors believe the future of the restaurant operator to turn robust backed by a new menu lineup. This is likely to drive more traffic for the near term and aid in capturing a major portion of the market share in the restaurants’ industry.

The market analysts remained hooked to the company’s performance in the past, which is likely to grow in the future. However, the company has been experiencing volatile prices of the ingredients in the Chipotle menu due to the macroeconomic uncertainties.

In addition, Chipotle suffered an increase in many of its menu’s critical ingredients in overseas. This is likely to increase the costs and expenses as well as raise its investments for international operations. The operations could face competition from several restaurant players who specializes in local cultural food traditions. These hindrances are likely to fade away in the midst of restaurant expansion.

Chipotle stock nears record high on new menu servings
Courtesy: Chipotle / Facebook post

The company has been aggressive in financing its growth with debt. This potentially generates more earnings than without debt financing. The shareholders are expected to be beneficial by the increases in earnings. As of June 30, 2019, Chipotle had a cash and short-term investment balance of $717.8 million while the total debt stood at $2.7 billion.

For the second quarter, Chipotle Mexican Grill served better-than-expected results. The top line improved by 13.2% year-over-year, which was spurred by a 10% increase in comp sales as well as a menu price increase. Digital sales doubled and accounted for 18.2% of sales for the quarter.

Read: Tilray lingers near a yearly low

As of June 30, 2019, Chipotle operated 2,482 Chipotle restaurants throughout the United States as well as 39 international Chipotle restaurants. The company opened 20 new restaurants and closed one Chipotle restaurant during the second quarter of 2019 and expects to open about 140 to 155 new restaurants.

The company expects comparable restaurant sales increases to be in the high single digits for the full year 2019. The company continues to invest in improving digital platforms and equipping select restaurants with an upgraded second make line dedicated to fulfilling out-of-restaurant orders.

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