Morningstar Rating

Stock Research and Analysis

by R.J. Hottovy, CFA

Bulls Say

We expect the fast-casual restaurant category to outpace the broader restaurant industry the next several years, driven by a compelling value proposition and attractive unit economics.
Chipotle is at the forefront of an industry movement toward naturally raised proteins, dairy products from pasture-raised cattle, and organic produce. Though these are more costly to source, fresh ingredients are a key source of differentiation.
A push into secondary concepts, including ShopHouse Southeast Asian Kitchen and Pizzeria Locale, could add new engines of long-term growth potential. Read more 

Bears Say

Fast-casual restaurant competition is increasing, and switching costs are nonexistent. We estimate that Mexican concepts make up nearly a quarter of the fast-casual industry in the U.S.
Many casual-dining chains have turned to aggressive discounting to reverse stagnant traffic trends, which could present additional fast-casual competition.
Chipotle must contend with unpredictable consumer spending trends, wage increases, and volatile commodity costs. Because there are fewer suppliers of naturally raised beef, chicken, and pork, food shortages and/or unpredictable pricing are possible. Read more 

Management

Chipotle features a seasoned management team with a great deal of restaurant industry experience. Chairman and co-CEO Steve Ells, who holds a degree from the Culinary Institute of America, founded Chipotle in 1993. President and co-CEO Montgomery Moran   Read more 

Profile

Chipotle Mexican Grill is the largest player in the $7 billion-plus domestic fast-casual Mexican restaurant category. Its menu includes burritos, bowls, tacos, and salads   Read more 

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