Chipotle shares were downgraded on Monday, but this did not slow the stock’s recent momentum.
Baird lowered its rating on Chipotle on Monday and cut its price target after taking over coverage of the restaurant chain. The firm is not worried that Chipotle has stopped growing, but rather that the company may need to spend much more in the future to achieve the same level of sales growth as before. In other words, Chipotle may have to spend more to achieve less growth.
Investors did not seem concerned by the warning. Shares rose 3% on Monday, making it the fourth day in a row of gains. Baird said Chipotle will probably need to invest more to keep up low-single-digit comparable sales growth in the future. This is a step down from the mid-single-digit growth the company has usually seen, and it could mean profit margins recover more slowly too.
The downgrade happened even though Chipotle has shown recent improvement. Comparable sales went up 2.2% year over year in the second quarter, after 0.5% growth in the first quarter and a 2.5% drop in the fourth quarter of 2025. Revenue increased by 9.3% to $3.35 billion, and management raised its full-year comparable sales outlook to low-single-digit growth. However, this progress came with some margin pressure. The restaurant’s operating margin dropped to 25.2% from 27.4% a year ago as food and labor costs increased and the company spent more on operations and hospitality.
Chipotle also dealt with a food-safety issue this summer after federal regulators linked a multistate Salmonella outbreak to jalapeños from Mexico that were supplied to Chipotle and other restaurants. The company had already started changing suppliers at affected locations before the outbreak was made public, and regulators have since said there is no longer any ongoing risk from the incident.
Even so, the news briefly raised concerns about customer traffic and caused shares to drop sharply in early August. Since then, the stock has mostly recovered, closing Friday just a little below where it was before the selloff started.
