For a restaurant designed to be a temporary springboard for a fine dining establishment, Chipotle Mexican Grill (CMG -1.51%) isn't doing too badly. The burrito joint has grown from a single Denver space in an old ice cream shop to a fast-casual chain with almost 3,500 restaurants. Read along for more information about investing in Chipotle stock.
Overview
What is Chipotle?
Chipotle, the booming fast-casual Mexican chain of restaurants, shouldn't even be here. The chain was founded in 1993 at a former Dolly Madison ice cream shop in Denver by a Culinary Institute of America graduate who wanted to make some quick cash so he could open a fine-dining establishment.
Steve Ells, the company's founder, borrowed $80,000 from his father to outfit the 850-square-foot restaurant. Since space was at a premium, Ells designed an open kitchen that's still a feature of Chipotle restaurants around the country.
Chipotle was designed as a testing ground for a future, upscale Ells restaurant that would serve fresh, whole, and unprocessed food from responsible sources. First-day sales were only about $240, but the concept gained momentum, partially due to its location across the street from the University of Denver. The success prompted Ells to open a second Chipotle in 1995, a third in 1996, and another 3,500-plus restaurants by 2024, including forays into Canada, the U.K., France, and Germany.
Despite its growth, Chipotle hasn't always enjoyed accolades. Ells and his co-CEO were criticized in 2014 for compensation packages that approached $50 million. The chain was linked to separate E. coli, salmonella, and norovirus outbreaks in 2015, significantly denting its reputation for serving fresh and safe food. Bill Ackman and his Pershing Square hedge fund took a 9.9% stake in the company in 2016, moving quickly to salvage the chain's battered name.
Ells was replaced as CEO in 2018 by Brian Niccol. The former CEO of the Yum! Brands (YUM -2.45%) Taco Bell chain succeeded Ells as chairman of the board of directors in 2020 before leaving to head up Starbucks (SBUX 0.59%) in August 2024. Although the company announced the closing of 65 restaurants in 2018, it said only five years later that it planned to almost double the number of establishments to 7,000.
Despite criticisms on a number of fronts that range from high caloric and sodium content to smaller-than-expected portion sizes, the restaurant chain continues to be praised for its efforts to serve responsibly sourced foods. Its statement of values notes that Chipotle was "born of the radical belief that there is a connection between how food is raised and prepared, and how it tastes."
How to invest
How to buy Chipotle stock
To buy shares of Chipotle, you'll need a brokerage account. If you still need to open one, these are some of the best-rated online brokers and trading platforms. Here's a step-by-step guide to buying Chipotle stock using the five-star-rated platform Fidelity.
Fidelity makes it easy to buy stocks. Its website offers a video tutorial and a step-by-step guide. Here's a screenshot of how to place a stock trade with Fidelity:
On this page, fill out all the relevant information, including:
- The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
- The ticker symbol (CMG for Chipotle Mexican Grill).
- Whether you want to place a limit order or a market order. Know the difference between a market order and a limit order; The Motley Fool recommends using a market order since it guarantees you buy shares immediately at the market price.
Before you hit the "Place Order" button, figure out your budget. Are you in a position to invest in the market? Have you paid down high-interest credit card balances and created an emergency fund? How much can you spend? Do you want to buy all your Chipotle stock at once, or periodically with dollar-cost averaging? These are all very good questions for investors to ask -- and answer.
Next, do your homework. Factors that might affect your decision include the level of your portfolio diversification, personal risk tolerance, company and industry knowledge, and assessment of Chipotle's competitive position.
If you decide the pros of investing in the company outweigh the cons, then complete the order page, click the "Place Order" button at the bottom and become a Chipotle shareholder.
Stock
Should I invest?
Should I invest in Chipotle?
As with any other investment, there's a short answer to why you might consider investing in this stock: It depends.
You may want to skip Chipotle stock if:
- You believe that competing restaurants will take a bite out of Chipotle’s market.
- You're worried about the periodic food safety issues that have plagued the chain.
- You expect inflation will continue to increase food costs.
- You think Chipotle shares are trading at unrealistically high prices.
- Your portfolio already has enough restaurant stocks.
On the other hand, you may want to go ahead and buy Chipotle stock if:
- You believe the fast-casual dining space will continue to make inroads into the fast food industry's customer base.
- You believe Americans will continue to appreciate Chipotle's commitment to responsibly sourced ingredients.
- You think the recent decline in inflation will eventually trickle down to restaurants.
- You'd like to balance your portfolio with a restaurant stock.
- You think Chipotle stock is undervalued and will increase as the number of restaurants continues to expand.
Profitability
Is Chipotle profitable?
Chipotle is quite profitable, and the restaurant industry is currently in a good place when it comes to profitability. According to the National Restaurant Association, the food service industry was expected to hit $1 trillion in sales in 2024, with a workforce growing to include 15.7 million people -- almost one of every 10 Americans in the civilian labor force.
While Chipotle acknowledged that rising labor costs reduced profits somewhat, it still managed to report 2023 net income of $1.24 billion, a 36.7% increase from the previous year and an 88.2% increase from 2021.
Total revenue increased 14.3% to $9.9 billion, with the average bill climbing 2.9% over the year. Operating margins at its restaurants rose to 26.2%, up from 23.9% in 2022; the company attributed the increase partly to lower avocado prices.
The company also said it's gaining market share. Since fast-casual restaurants attract more affluent diners, Chipotle is somewhat insulated from downturns that typically affect companies like PepsiCo (PEP -2.26%) and McDonald's (MCD -0.88%). Niccol said during a second-quarter conference call that transactions grew across all income levels for Chipotle.
Dividends
Does Chipotle pay a dividend?
Chipotle doesn't pay a dividend. Instead, the company puts its money into the business and into share repurchases, which tend to reward investors by increasing the price of a stock. Through the first six months of 2024, Chipotle repurchased more than 172 million shares. Over the past five years, it's repurchased an average of almost 110 million shares every quarter.
Exchange-Traded Fund (ETF)
ETFs
ETFs with exposure to Chipotle
For investors who don't want to put all their eggs into one basket, exchange-traded funds (ETFs) can be an excellent alternative to individual stock-picking. Since ETFs are a collection of stocks, a poor quarter or year by a couple of its stocks doesn't necessarily mean major losses by investors. In some cases, ETFs are diversified enough that even a downturn in one sector -- such as airlines, which suffered during the COVID-19 pandemic -- can be offset by gains in other sectors. Here are three ETFs either focused on or adjacent to the restaurant industry that offer exposure to Chipotle:
1. AdvisorShares Restaurant ETF
The AdvisorShares Restaurant ETF (EATZ -0.37%) was launched in 2021. The fund held almost 50 restaurant stocks in mid-2024, with Cava Group (CAVA 3.3%) shares making up 6.4% of the fund in August 2024. Chipotle, at 4.7%, ranked at No. 10. The ETF is small, with assets under management of only $2.5 million. It has a reasonable ETF expense ratio of 0.6%.
2. Invesco Food & Beverage ETF
Invesco Food & Beverage ETF (PBJ -1.15%): Slightly larger than the AdvisorShares Restaurant ETF, the Invesco fund focuses on consumer staples. Chipotle shares make up 4.2% of its portfolio. The fund's largest holding is Coca-Cola (KO -1.52%), which makes up 5.6% of its $115 million in holdings. The Invesco ETF offers an expense ratio of 0.57%.
3. SPDR S&P 500 ETF Trust
The SPDR S&P 500 ETF Trust (SPY 0.58%) is the largest single holder of Chipotle stock, with almost $904 million in the restaurant chain's shares. The venerable fund is enormously popular with "set-it-and-forget-it" investors who take a long-term approach to investing. It consists of shares listed in the S&P 500 and weighted by value. Created in 1993, the fund has almost $541 billion in assets and an ultra-low expense ratio of 0.09%.
Stock splits
Will Chipotle stock split?
Companies typically announce stock splits when high share prices discourage investors from putting money into the company. Given that Chipotle shares topped $3,000, an unheard-of amount for a restaurant stock, the company decided it might be missing out on some truly discouraged investors and announced a 50-to-1 split in early June 2024. The Chipotle split was one of the biggest in the history of shares traded on the New York Stock Exchange.
Related investing topics
Bottom line on Chipotle
Chipotle has frequently been a victim of its own high expectations. It gets outsized attention when food safety problems occur because of its focus on quality ingredients, and its popularity among white-collar urban and suburban office workers makes it an easy target for satire. The chain's financial performance, however, has been anything but a laughingstock.
The restaurant industry is notoriously susceptible to economic cycles, but Chipotle has been focused enough to weather most storms. Investors interested in adding restaurant stocks could certainly find worse stocks to buy and hold.
FAQ
How to invest in Chipotle FAQ
Can you buy Chipotle stock?
Chipotle stock has been publicly traded since January 2006. All you need is a brokerage account and money to buy stock in the restaurant chain.
Is Chipotle listed as a public stock?
Chipotle has been a public stock since 2006. It trades on the New York Stock Exchange under the CMG ticker.
Who owns most of Chipotle stock?
Institutional investors owned almost 92% of Chipotle stock as of April 2024. The Vanguard Group held 136.6 million shares, almost 11% of institutional holdings.
Does Chipotle pay dividends?
Chipotle does not pay dividends. The company historically has put extra cash back into the business or rewarded shareholders with stock repurchases.
