Wall Street is wondering whether Chipotle’s plan to eat into the costs of food inflation will work. The fast-casual chain warned Wednesday night that rising costs for meat and other ingredients would hurt profits, as it does not plan to raise prices at the same time. Analysts are concerned about how this will affect margins and profits, and in some cases are lowering their outlook for stock prices. Chipotle’s finance chief Adam Reimer told analysts that the company is facing an “acceleration” of mid-single-digit inflation, which he attributed to tariffs and rising beef prices. Reimer said he expects these cost increases to continue into 2026, but the company does not intend to pass the entire impact on to consumers. Wall Street isn’t convinced by that strategy. The California-based company’s stock fell more than 16% in midday trading Thursday, hitting a two-year low and marking its worst day since 2012. Morgan Stanley analyst Brian Haber cited the impact of these inflationary pressures in a note to clients on Thursday, saying, “Margins will be quite challenging into the early part of next year.” CMG 1D Mountain Chipotle, 1 Day Harbor noted that Chipotle’s fight against inflation is surprising because it has demonstrated relatively strong supply chain management. He lowered his price target from $59 to $50. “We may see some conservatism here, and the first half will be even worse,” Haber wrote to clients, shortening the first half of the year. Barclays analyst Jeffrey Bernstein said keeping pricing below inflation could prove the company’s relative value. However, Bernstein lowered his price target by $5 to $38, which he said could slow strong earnings per share growth. Chipotle’s Reimer tried to argue to analysts that not raising prices in line with costs could show the chain understands the broader economic situation. Consumer confidence in 2025 has fallen to multi-year lows as Americans weather the fallout from President Donald Trump’s tariff policies. “We’re not going to completely offset this increase in inflation in the near term,” Reimer told analysts Wednesday. “While this will put pressure on our margins, we believe it is the right thing to do to continue to provide exceptional value to our guests in this difficult economic climate.” Bernstein Danilo Gargiulo said he has stopped meeting with Chipotle analysts, believing that management is still exploring the best ways to communicate the company’s value proposition and increase engagement with its loyal consumers. The company acknowledged that it is seeing a backlash, especially among young and low-income consumers. Gargiulo warned that earnings per share growth next year may be only marginally positive, and lowered his price target by about 33% to $40. But Gargiulo said the “silver lining” is that Chipotle should come through this tough period as a better business. “We strongly believe that Chipotle’s long-term compounding ability is intact and are confident that management will not downplay this negative backdrop,” Gargiulo said. “We expect these learnings to lay the foundation for a stronger Chipotle.” Bank of America analyst Sara Senatore similarly said that the company should be able to return to growth once the macro environment improves. But he said the bank now expects same-store sales to fall 1.6% in the fourth quarter, down from the previously expected 0.5% increase. According to LSEG, the majority of analysts rate the stock as a buy. And now may be the time to buy on the spur of the moment. Wall Street’s average price target suggests the stock could recover nearly 60%.
Food inflation has wiped out Chipotle. Wall Street believes there is little chance for companies to survive unless they raise prices.
