Chipotle Mexican Grill (CMG) has announced a new $500 million stock buyback program, which is in addition to the company’s current share repurchases.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Chipotle’s board of directors approved the new stock buybacks, which come with CMG shares down 35% on the year. Chipotle has struggled this year with a slowing U.S. economy and a pullback in discretionary spending among consumers who are eating out less often.
Previously, Chipotle had $839 million remaining on its share repurchase program at the end of this year’s second quarter. Chipotle’s stock buyback program has been in place since 2008 and has no set expiration date.
Valuation Concerns
In addition to the tough macroeconomic environment, Chipotle’s stock has also been pulled lower over concerns related to its high valuation. CMG stock currently trades at 35 times future earnings estimates, which is rich, especially for a restaurant chain.
Additionally, Chipotle’s stock was hit hard after the company missed on same-store sales with its most recent earnings print. Same-store sales fell 4% year-over-year, while Wall Street had expected a 2.9% decline. At the end of this year’s second quarter, Chipotle had repurchased a record $990 million of its own stock. Buybacks increase the ownership stake of shareholders and are popular with investors.
Is CMG Stock a Buy?
The stock of Chipotle Mexican Grill has a consensus Strong Buy rating among 27 Wall Street analysts. That rating is based on 22 Buy and five Hold recommendations issued in the last three months. The average CMG price target of $58.57 implies 48.81% upside from current levels.
