Is Chipotle a Buy, Sell, or Hold in 2025?

Core Viewpoint - The departure of Chipotle's CEO presents an opportunity to evaluate the company's stock performance and future prospects, especially given the strong historical returns under his leadership [1][2]. Leadership Transition - Following the CEO's departure, Chipotle appointed Scott Boatwright, the Chief Operating Officer, as interim CEO, who has been with the company since 2017 and contributed significantly to its success [3]. - The company also accelerated the appointment of Adam Rymer as Chief Financial Officer, with former CFO Jack Hartung remaining to assist during the transition [4]. - Chipotle is focusing on internal promotions for its leadership roles, which may enhance company culture and morale according to survey data [5]. Growth Strategy - Chipotle aims to expand its restaurant count to 7,000 locations in North America and increase its international presence, with 3,615 locations currently operational [6]. - The company reported third-quarter 2024 results showing $2.8 billion in revenue and$387.4 million in net income, reflecting year-over-year growth of 13% and 23.7% respectively [7]. - The growth was driven by the addition of 294 new company-owned locations and a 6% increase in comparable-restaurant sales, with a 3.3% rise in transactions and a 2.7% increase in average check [8][9]. Financial Health - Chipotle maintains a strong balance sheet with no debt and $2.3 billion in cash and investments, allowing for stock repurchases totaling$488.1 million in the most recent quarter [10]. - The company has $1.1 billion remaining under its current buyback program, which reduces the number of outstanding shares and increases shareholder ownership [10]. Future Projections - Management projects the opening of 315 to 345 new company-operated restaurants in 2025 and aims to increase average-unit volumes from$3.2 million to over $4 million [11][12]. - If successful, annual revenue could exceed$28 billion, representing a 162% increase from the trailing-12-month results of $10.7 billion [12]. Stock Valuation - Chipotle's stock has historically traded at high valuations, with a five-year median price-to-earnings ratio of 63.9, but is currently trading at a slight discount of 54.6 times earnings [13]. - The company needs to build shareholder confidence by meeting its earnings and expansion goals, making it a potentially attractive investment opportunity despite leadership changes [14].