Chipotle's (CMG) disappointing first quarter report doesn't point to a bleak future — but shareholders may need to hold on for the ride. 

"The fundamentals of the business are intact, and this negative cycle shall eventually pass, leaving a brand that will have gained share of market, through better value for money and in-store execution," Bernstein analyst Danilo Gargiulo wrote in a note titled "Chipotle... Not for the faint-hearted."

Gargiulo went on to debunk the previous thought that Chipotle was "more recession resilient." On Wednesday, after market close, the company posted its worst quarter of same-store sales growth since 2020 and a decline in foot traffic for the first time since 2022.

"The scale of the brand and the wide-spread impact of the low macro sentiment did not protect Chipotle this time," Gargiulo said. Currently, there are 3,781 locations; it has a goal of 7,000 restaurants in the US and Canada long-term. 

In an interview with Yahoo Finance (video above), CEO Scott Boatwright said Chipotle's recent customer study found that diners are sitting on the sidelines, largely due to financial constraints.  

"It's really trying to save money ... uncertainty around what's going on with the global economy ... concerns around eating out more or eating at home more often versus eating out," he said. 

He added that there is a "convenience challenge" and the company needs to double down on its unit growth strategy. There are no plans in the immediate future to raise prices as Chipotle's team tries to work out the full impact of Trump's tariff policies. 

Seemingly, Wall Street remains optimistic on the burrito chain. As of Thursday, there are 27 Buy ratings on shares, nine Hold, and zero sells.

'Show me' story

Per Yahoo Finance data, shares of Chipotle are down 21.6% from their 52-week high of $69.26, now sitting around $50 per share, above its 52-week low of $44.46. 

Year-to-date shares of Chipotle are down 18%, compared to the broader S&P 500's (^GSPC) 7% drop. 

"The valuation floor is not too far, but expect Chipotle to be a ‘show me’ story before inflecting," Gargiulo said. "The short thesis on deteriorating macro seems to have played out, but investors may still await for data showing acceleration." 

"Based on our forecast, we will return to positive transactions in the second half of the year," Boatwright told Yahoo Finance. The company plans to increase its digital ad and marketing spend, introduce new sides or a new dip this summer, and provide a new limited-time offering.

CFO Adam Rymer said on its earnings call that "as you get closer to June, you're more in that mid- to high-single digit, in that 6% to 7% range [in same-store sales growth]," adding that foot traffic growth will likely be close to flat exiting the second quarter. 

"We are optimistic Chipotle can sustain the current run-rate," Bank of America analyst Sara Senatore wrote in a note to clients, now that Easter has kicked off what it calls the burrito season.

Gargiulo said there will likely be a "debate" on whether Chipotle's same-store sales growth will be "structurally lower" or if its "long-term fundamentals and optionality will support growth re-acceleration once the storm is over." He said he believes in the latter. 

Deutsche Bank analyst Lauren Silberman said that higher marketing spend and new menu items or sides will "bolster" revenue for Chipotle. For example, queso added 2 percentage points to the average check when it launched.

Increased advertising spend has also "proven effective for other operators in the current environment." 

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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