Wall Street is wondering if Chipotle ‘s plan to eat the cost of food inflation will pay off. The fast-casual chain warned Wednesday night that cost increases for its ingredients like meat will weigh on margins, given it doesn’t plan to increase prices in tandem. Analysts are fearful about what that means for its margins and earnings — and, in some cases, are lowering their outlooks for the stock. Chipotle finance chief Adam Rymer told analysts that the company is facing “accelerating” inflation to the mid-single digit percentage range, which he linked to tariffs and higher beef prices. Rymer said he expects those cost increases to remain into 2026, though the company does not plan to pass down the full impact to consumers. Wall Street isn’t sold on that strategy. Shares of the California-based company tumbled more than 16% in midday trading Thursday, hitting their lowest point in two years and on track for their worst day since 2012. “We’d assume margins look quite tough into early next year,” Morgan Stanley analyst Brian Harbour wrote to clients in a Thursday note, citing the impact of these inflationary pressures. CMG 1D mountain Chipotle, 1-day Harbour noted that Chipotle’s struggles with inflation are surprising because the company has typically shown relatively strong supply chain control. He cut his price target to $50 from $59. “There could be some conservatism here and 1H will be worse,” Harbour wrote to clients, using shorthand for the first-half of the year. Barclays analyst Jeffrey Bernstein said that keeping pricing below inflation can demonstrate the company’s relative value. But Bernstein, who lowered his price target by $5 to $38, said it could lead to a lack of material growth on earnings per share. Chipotle’s Rymer tried to make the case to analysts that not raising pricing in lockstep with costs can show the chain is understanding of the broader economic landscape. Consumer confidence readings have tumbled to multiyear lows in 2025 as Americans navigate the impacts of President Donald Trump’s tariff policy. “We do not plan to fully offset this incremental inflation in the near term,” Rymer said to analysts on Wednesday. “While this will pressure margins, we think it’s the right thing to do to continue to provide extraordinary value to our guests during this challenging economic backdrop.” Bernstein Danilo Gargiulo said he left Chipotle’s analyst call believing management is still looking for the best way to communicate its value proposition, as well as boost engagement among loyal consumers. The company acknowledged that it has seen in particular pullback among younger and low-income consumers. Gargiulo warned that earnings per share growth may only be marginally positive next year and pulled his price target down around 33% to $40. But Gargiulo said the “silver lining” is that Chipotle should come out of this tough period as a better business. “We are firm believers that Chipotle’s long-term compounding capability is intact, and we are confident that management will not take this negative backdrop lightly,” Gargiulo said. “We expect that these learnings will be a foundation for a stronger Chipotle.” Bank of America analyst Sara Senatore similarly said the company should be able to return to growth when the macroenvironment improves. However, she said the bank now expects fourth-quarter same-store sales to slide 1.6% from a prior forecast of 0.5% growth. The majority of analysts have a buy rating on the stock, according to LSEG. And it may be time to buy the dip: The average price target on Wall Street implies shares can rebound by nearly 60%.
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