Chipotle Mexican Grill Stock (NASDAQ:CMG) Slides as it Pins its Hopes on Adobo Ranch

For a while there, restaurant chain Chipotle Mexican Grill (CMG) could do no wrong. Stock prices exploded, diners showed up in droves, happy to ditch fast food for something that at least seemed like a better option. But in Monday afternoon’s trading, shares slipped nearly 1.5% as diners pulled back on restaurant dining altogether, and Chipotle’s only real answer was “adobo ranch.”

While there is a certain value in this logic—ranch is proving more popular than ketchup, and adobo ranch, with its spicier flavor profile, should be attractive to customers—there is no denying that customers in general are pulling back on restaurant consumption of all types. Starting June 17, Chipotle will offer the adobo ranch condiment, which looks to piggyback off the popularity of regular ranch salad dressing.

This is the first new dip that Chipotle has rolled out since 2020, reports note, when it brought out the queso blanco dip. And Chipotle has high hopes for the slightly spicier new dip; same-store sales saw their first dip since 2020 in the most recent quarter, and this was with the release of honey chicken, which did not seem to have the impact that some were looking for after all. Though honey chicken did only emerge in early March, so its impact on quarterly figures may have been muted.

A Pinch of…Hospitality?

But there is another ingredient that Chipotle seems to be struggling with, as Scott Boatwright, Chipotle’s chief operating officer, noted. While Chipotle back then was trying to rebuild after some serious issues with product safety, one other point emerged: a lack of hospitality. So Boatwright set out to change that, and make Chipotle not just a source for fast food with a higher-end price tag and perceived quality: he also worked to make it friendlier.

Whether he succeeded or not is a subjective measure at best, but Boatwright hoped to change that by forcing employees to parrot simple phrases while they worked to roll food out the door in rapid fashion. Boatwright wanted employees to provide “basic greetings” and “questions like ‘What can I make fresh for you today?’,” which Boatwright believed, apparently, would sound authentic. In an unexpected twist, Boatwright actually acknowledged that the trick was to make the greetings not “feel forced.”

Is Chipotle a Buy, Sell or Hold?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on CMG stock based on 20 Buys and eight Holds assigned in the past three months, as indicated by the graphic below. After a 16.13% loss in its share price over the past year, the average CMG price target of $58.27 per share implies 12.62% upside potential.

See more CMG analyst ratings

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