Chipotle stock falls after Q3 earnings report

shares Chipotle Mexican Grill Trading fell as much as 19% on Thursday after the company lowered its full-year same-store sales forecast for the third quarter in a row.

Including Thursday’s move, the stock has fallen 45% this year, dropping its market value to about $43 billion. At least five Wall Street analysts lowered their price targets for the stock after the report, anticipating investors’ dissatisfaction with the burrito chain’s shrinking traffic and gloomy outlook.

“It is difficult to call a bottom for sales given the multitude of factors affecting demand,” Citi analyst Jon Tower wrote in a research note, revising his price target to $44 per share from $54.

Chipotle’s same-store sales rose 0.3% in the third quarter, but the chain’s traffic fell. While many restaurant chains have struggled in recent years as customers ravaged by inflation eat less, analysts were unsure if that would happen. the chain’s perceived value contributed to Chipotle’s problems. Although burritos and bowls average around $10, consumers often assume their average prices are closer to the $15 entrees of their fast-casual peers, executives said on the conference call.

“While we knew Chipotle traffic slowed in the fall, we were surprised by the magnitude and resulting deleveraging reported last night,” BTIG analyst Pete Saleh wrote in a note. “We are frankly stunned by the sudden emergence of this traffic weakness and are not convinced that affordability concerns are the primary driver here.”

Restaurant customers are visiting less often, especially those ages 25 to 35, a key demographic for the company, CEO Scott Boatwright said on Wednesday’s earnings conference call. Same-store sales have worsened so far in October, and the company now projects that sales at restaurants open at least a year will shrink in the fourth quarter and decline by a low-single-digit percentage for the full year.

“We are very concerned that the menu and marketing actions taken so far have not adequately offset the pullback in traffic,” Bernstein analyst Danilo Gargiulo said.

Still, most analysts attributed the slowdown to industry-wide challenges, not company-specific issues that Chipotle must address. Unemployment, rising student loan repayments and slowing real wage growth, which causes inflation, are putting pressure on consumers’ spending, Boatwright said.

“We believe the brand remains fundamentally healthy (stable share of customer restaurant wallet) and expect a return to growth as the macro improves,” Bank of America Securities analyst Sara Senatore said in a note to clients. he said.

Chipotle’s poor performance bodes poorly for its fast-casual peers. sweet green And Javanese. Morgan Stanley analyst Brian Harbor called fast-casual restaurants “This Season’s Halloween Horror” in a research note covering Chipotle’s earnings report.

Sweetgreen shares fell 6% in Thursday trading, while Cava shares fell 8%. Both are scheduled to report third-quarter results next week.

Correction: The company now forecasts that sales at restaurants open at least a year will decline by a low-single-digit percentage for the full year. An earlier version incorrectly expressed percentage movement.