Chipotle Mexican Grill, Inc. (CMG): A Bull Case Theory

We came across a bullish thesis on Chipotle Mexican Grill, Inc. on r/Valueinvesting subreddit by u/anonymous_sheep1. In this article, we will summarize the bulls’ thesis on CMG. Chipotle Mexican Grill, Inc.'s share was trading at $46.76 as of July 25^th. CMG’s trailing and forward P/E were 41.38  and 38.46 respectively according to Yahoo Finance.

Chipotle’s shares have sold off following weaker quarterly comps and a guidance cut, leaving the stock trading near 30x free cash flow (FCF), at the lower end of its five-year EV/EBITDA and P/FCF averages. Historically, such valuations have offered attractive entry points, and a five-year discounted cash flow (DCF) model supports an 11% IRR, assuming a flat 2025 FCF of $1.5 billion with 10% CFO and 7% FCF CAGR through 2029 and a 40x FCF exit multiple.

The market’s concern centers on multiple compressions, reflecting fears that Chipotle’s growth is maturing amid delivery-related cannibalization and overlap from new stores. However, underlying fundamentals remain robust, with average unit volumes (AUV) and total addressable market (TAM) expansion still offering significant headroom.

Management continues to target 7,500 U.S. company-owned units by 2032, up from roughly 4,000 today, underscoring confidence in sustained growth. Historical precedent suggests that similar periods of compression have proven temporary as the company demonstrated consistent execution.

For long-term investors, signs of a “bottom” may emerge with stabilization in same-store sales and improved visibility around unit economics as Chipotle expands its footprint. Given its durable brand, strong unit-level returns, and long runway for expansion, current valuation levels offer an appealing setup for investors willing to look through near-term volatility, with the potential for multiple re-expansion as growth concerns abate.

Previously we covered a bullish thesis on Chipotle Mexican Grill, Inc. (CMG) by FluentInQuality in March 2025, highlighting its operational efficiency, strong brand, and consistent growth. The stock has depreciated ~14% since due to earnings pressure and multiple compression. The thesis remains valid given Chipotle’s long-term fundamentals. anonymous_sheep1 shares a similar view but emphasizes valuation upside amid temporary concerns.

Chipotle Mexican Grill, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 78 hedge fund portfolios held CMG at the end of the first quarter, which was 83 in the previous quarter. While we acknowledge the potential of CMG as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.