Why I’m Obsessed with Chipotle but Waiting to Buy the Stock

Why I’m Obsessed with Chipotle but Waiting to Buy the Stock

Chipotle has always had a special place in my heart. Living in Northeast Ohio, I was thrilled when three Chipotle locations opened within a 15-minute drive. It meant I could enjoy my favorite burritos as often as I wanted without any guilt. Yes, I admit it—there were days when I visited two or three times. I thought I had found burrito heaven!

Recently, Chipotle made headlines with a historic 50-to-1 stock split, bringing their stock price to about $53 per share. However, the stock has dropped 15% since then. To add to the drama, Starbucks swooped in and hired Chipotle’s CEO for $13 million. This has raised concerns about Chipotle’s future, both for me as a consumer and as a potential investor. So, let’s dive into whether Chipotle stock is worth buying right now. Spoiler alert: I’m buying Chipotle stock in this very post.

Chipotle’s Stock Performance Breakdown

After the 5-for-1 stock split, Chipotle’s shares are now trading at $53. To put it in perspective, this is equivalent to a pre-split price of $2,650. The stock had reached an all-time high of $69 per share, or $3,500 in split terms, just before the split on June 18.

Here’s a snapshot of Chipotle’s performance metrics:

- Return on Invested Capital (ROIC): 11.5% over the past five years, with a notable 16% last year.

- Free Cash Flow (FCF): Last year’s record was $1.3 billion, with a five-year average of $856 million.

- Profit Margin: Higher in the last 12 months compared to the five-year average.

- Gross Margin: 27%.

Chipotle’s revenue growth has been impressive, largely due to a significant increase in store count. In 2018, the company had about 2,400 locations. By 2023, that number has surged to approximately 3,440, marking a 40% increase.

My Chipotle Experience: Portion Sizes and In-Restaurant Issues

As a frequent Chipotle customer, I’ve noticed some troubling inconsistencies. For example, I always order online to avoid the line, but the portion sizes can be hit or miss. This has been a long-standing issue for me. I’ve often felt that the in-person service is inconsistent, and online orders don’t always measure up.

To get to the bottom of this, we conducted an experiment. We bought the same bowl—white rice, chicken, fajita vegetables, mild salsa, corn salsa, and cheese—at three different Chipotle locations in Northeast Ohio: Brecksville, Independence, and Fairlawn. Here’s what we found:

- Fairlawn: The smallest bowl weighed 17.6 ounces.

- Brecksville: The second largest bowl was 20.92 ounces.

- Independence: The heaviest bowl was 21.16 ounces.

The average weight across these locations was 19.9 ounces. The biggest surprise was the significant disparity between the smallest and largest bowls. To further understand the consistency, we reached out to our community and fellow YouTubers. Here’s what we discovered:

- Illinois: The lightest bowl was 17.39 ounces.

- Highland Heights, Ohio: The heaviest bowl was an astounding 26.49 ounces.

The average bowl size from our findings was 21.62 ounces, which closely matches a similar study out of New York that reported an average of 21.5 ounces. This variation highlights the need for improved portion control.

Chipotle has pledged $50 million to address these portion size inconsistencies. Given their strong free cash flow, they can easily afford this investment. If they can successfully tackle this issue under the new CEO, it could lead to increased customer satisfaction and higher same-store sales.

Investing in Chipotle: The Stock Analysis

Despite the portion size issue and CEO departure, Chipotle remains a promising investment. Here’s a breakdown of the stock analysis:

- Intrinsic Value Estimates:

- Low Price: $13 per share

- High Price: $62 per share

- Middle Price: $27 per share

With the stock currently around $53, it’s too expensive for my taste. I’m setting my watch list price at $30 per share, which will allow me to start selling puts at lower prices.

Final Thoughts

Even though Chipotle’s stock is currently pricey and the company faces some operational challenges, my love for their food remains strong. I’ll continue to enjoy their burritos while waiting for the stock to reach a more attractive price point. I’ve increased my watch list price to $30 per share and will be patient as I wait for a better entry point.