By Evie Liu

Chipotle Mexican Grill shares rose on Thursday after the burrito chain posted quarterly revenue that exceeded analysts' expectations the day before.

For the three months ending in March, Chipotle grew net revenue by 7.4%, to $3.1 billion, beating analyst expectations of $3.07 billion. Adjusted earnings came in at 24 cents per share, a 17.2% decrease from the year-ago quarter, in line with expectations.

Comparable restaurant sales increased 0.5% from a year ago, while analysts had expected it to decline 0.7%. The stock jumped 6% on Wednesday after market close as investors were encouraged by the numbers.

Chipotle, which has struggled with declining same-restaurant sales, needed to prove that its burritos and bowls are still worth the price. Much of its recent growth has been driven by new restaurant openings. In the fourth quarter, same-restaurant sales declined 2.5% from a year earlier as higher prices pushed many Chipotle customers to visit less often.

Fast-food competitor McDonald's has been launching aggressive deals, including the recent revamp of its value offerings that includes many under-$3 menu options and $4 meal bundles. By comparison, Chipotle -- where a typical meal often costs $10 to $12 -- looks less affordable.

"The business model of Chipotle drew broad industry awe -- and competition--but such exceptional sales/investment ratios of 2-3 times and 25% to 30% store margins have proven increasingly difficult for the brand to expand, or even sustain," wrote JPMorgan analyst John Ivankoe on Thursday.

Shares are down about 36% over the past 12 months, now trading near historically low valuations. Investors will be watching whether the chain can revive same-store visits over the course of the year. For the full-year 2026, management expects comparable restaurant sales to be about flat from 2025, and plans to open 350 to 370 new restaurants.

Chipotle announced the "recipe for growth" strategy alongside its February earnings. The company is upgrading kitchen equipment to speed up food preparation and improve consistency. It also spent more on marketing, revamped the loyalty program, and leaned on new menu items -- especially limited-time offers -- to boost sales.

The Chicken al Pastor has been a hit, the loyalty program is gaining more users, and the company recently filled its chief marketing officer role.

"Our first quarter exceeded expectations as we advanced our Recipe for Growth strategy, delivering tangible progress across operations, digital, menu innovation, people, and development," said CEO Scott Boatwright in a statement.

Wall Street is still on the fence. Although there are early signs of improvement, it's still unclear whether Chipotle can return to stronger, mid-single-digit sales growth -- something investors likely need to see for the stock to move significantly higher, according to BNP Paribas analyst Steve McManus.

Earnings face additional headwinds. Food costs will likely rise in the second quarter but should ease later in the year, says McManus. However, he noted that higher energy and utility costs could limit how much profits improve, even if sales increase.

Still, Morgan Stanley analyst Brian Harbour sees limited downside risk in Chipotle stock at the current valuation of 26 times earnings.

This view is echoed by Sarang Vora, an analyst at Telsey Advisory. "The risk-reward is favorable at the current valuation, as potential gains from strategic initiatives should outweigh cyclical and near-term concerns," wrote Vora on Thursday.

In the longer term, Morgan Stanley's Harbour believes that Chipotle remains one of the strongest large-cap growth stories in the restaurant sector due to its room for expansion. The company aims to operate about 7,000 restaurants in North America; it currently has about 4,100.

About two-thirds of analysts polled by FactSet have a Buy rating on the stock, with an average target price of $44, implying about 33% upside from current levels.

Write to Evie Liu at evie.liu@barrons.com

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April 30, 2026 13:31 ET (17:31 GMT)

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