Microsoft (MSFT) and Chipotle (CMG) Hit Yearly Lows. Are They Stocks To Buy Now?

Microsoft (MSFT) and Chipotle (CMG) Hit Yearly Lows. Are They Stocks To Buy Now?

  • 21.03.2025 18:33
  • msn.com
  • Keywords: Stock Market, Investment

Microsoft (MSFT) and Chipotle (CMG) have reached yearly lows, presenting buying opportunities despite risks. Microsoft faces AI spending concerns but boasts strong cash reserves and fundamentals, while Chipotle's drop post-split is driven by growth worries and competition, yet shows positive earnings and menu success. Both stocks are seen as potential buys with long-term upside.

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Estimated market influence

Microsoft

Microsoft

Negativesentiment_dissatisfied
Analyst rating: Strong buy

MSFT stock has been on a steady slide lower and has lost 17% of its value.

Chipotle Mexican Grill

Chipotle Mexican Grill

Negativesentiment_dissatisfied
Analyst rating: Buy

CMG stock has lost a fifth of its value and recently hit an annual low of around $47.50 per share.

Context

Analysis of Microsoft (MSFT) and Chipotle (CMG)

Microsoft (MSFT)

  • Stock Performance: MSFT stock hit its 52-week low of $377 per share after peaking at an all-time high in July. It has lost 17% of its value year-to-date, compared to a 2.5% gain for the S&P 500.
  • Revenue and Earnings: Q2 revenue was $65.6 billion (+10%), beating estimates of $64.8 billion. Earnings were $3.09 per share, topping forecasts of $3.05 per share. Azure cloud services grew by 23%, slightly below expectations of 30%.
  • Valuation: P/E ratio of 31, below its five-year average. Wall Street predicts 15% long-term earnings growth.
  • Cash Position: Microsoft holds $71 billion in cash and short-term investments, providing a strong financial cushion.
  • AI Investments: Heavy spending on AI (e.g., Azure integration) has raised concerns but remains a strategic focus.

Chipotle Mexican Grill (CMG)

  • Stock Performance: CMG stock dropped by 20% after its record-breaking 50-for-1 stock split in June, hitting a 52-week low of $47.50 per share.
  • Revenue and Earnings: Q2 revenue was $2.87 billion (+13%), beating forecasts of $2.84 billion. Earnings were $0.28 per share, topping estimates of $0.27 per share. Foot traffic increased by 4%, with new menu items like smoked brisket performing well.
  • Valuation: P/E ratio of 44, which is unusually low for Chipotle but still elevated compared to the broader market. Analysts forecast 18% earnings growth over the next five years.
  • Challenges: Same-store sales growth of 5.8% fell short of Wall Street’s 6.2% estimate. Concerns include rising competition, potential supply chain disruptions from tariffs on Mexican imports (avocados, peppers), and leadership changes (new CEO Scott Boatwright).

Market Implications and Strategic Considerations

  • Both companies are trading at significant discounts to their highs, presenting opportunities for long-term investors.
  • Microsoft’s strong cash position and Azure growth make it a resilient bet in the tech sector, despite AI competition.
  • Chipotle’s fundamentals remain solid, but its recovery depends on managing same-store sales growth and navigating supply chain risks.

Long-Term Effects and Regulatory Impact

  • For Microsoft: Continued investment in AI and cloud services could drive long-term growth, though tech spending may slow.
  • For Chipotle: Success will depend on maintaining menu innovation and operational efficiency amid increased competition and potential regulatory challenges (e.g., labor costs, trade policies).

Competitive Dynamics

  • Microsoft: Faces competition from AI advancements by companies like DeepSeek but retains a strong market position in cloud services.
  • Chipotle: Competing with fast-casual dining chains and quick-service restaurants, while also dealing with the loss of former CEO Brian Niccol to Starbucks (SBUX).

Conclusion

Both MSFT and CMG are risky yet promising investments at their current lows, offering potential for significant upside if their fundamentals stabilize and growth resumes.