Chipotle Slips 18% YTD: Will It be a Gain or a Loss Buying the Dip?

Core Viewpoint - Chipotle Mexican Grill (CMG) has faced significant challenges in early 2025, with its stock declining 17.8% year-to-date, contrasting with the Zacks Retail-Restaurant industry's growth of 1.5% [1][3]. Group 1: Financial Performance - CMG's stock has underperformed compared to major industry players like BJ's Restaurants, McDonald's, and Darden Restaurants, which have seen gains of 1.3%, 5.9%, and 11% respectively [4]. - The company anticipates same-store sales growth for 2025 to be in the low to mid-single digits, a decrease from the 7.4% growth experienced in 2024 [8]. - Earnings estimates for 2025 have been revised down by 0.8% over the past 30 days, although year-over-year growth is still projected at 14.3% [9]. Group 2: Operational Challenges - The introduction of a 25% tariff on imports from Mexico and Canada, and a 20% tariff on China, is expected to pressure CMG's margins, with a projected 60-basis-point impact on the 2025 cost of sales [6][8]. - Labor costs for the first quarter of 2025 are expected to be in the high 24% range, with wage inflation anticipated in the mid-single-digit range [7][8]. - The company sources approximately 50% of its avocados from Mexico, which is critical for its menu, and this reliance poses risks due to the new tariffs [5][6]. Group 3: Market Positioning - CMG is currently trading at a premium compared to its industry peers based on a forward 12-month price-to-earnings (P/E) ratio, complicating investment decisions [13]. - Technical indicators show that CMG stock is trading below its 50-day and 200-day simple moving averages, indicating a negative market sentiment [11][12].