Starbucks Corporation (NASDAQ:SBUX) and Chipotle Mexican Grill, Inc. (NYSE:CMG) were quite important when it came to Jim Cramer’s morning appearance on October 12th. The pair were part of an exclusive report by the CNBC TV host which outlined that Starbucks was not interested in acquiring Chipotle. The news was important, as you’ll find out when we’ll discuss the narrative for both firms below, but first, here’s what Cramer said:
“Yeah this weekend I worked with Brian Niccol, I can confirm that Starbucks is not going to buy Chipotle. They’re not interested in doing it. They’re gonna stay laser focused, Brian’s says he’s got great momentum at Starbucks. Importantly plenty of room for growth. And what he’s gonna do he’s looking forward to share [inaudible] including fiscal year 27 guidance later this month. So let’s just put that to bed. Move on.”
“But I do know, Brian Niccol’s saying, look our turn is real and the numbers are real. And we don’t want to derail anything! He confirmed of course, what he said last time, they had 7.9% comps! Why would they even look at Chipotle? So I know that they do, talk obviously, he left Chipotle, they had a great relationship! But that story’s done. Next.”
For Starbucks, the narrative is all about the turnaround and Cramer has discussed it on several occasions in this context. While the shares lost 15% between early September and early October, Cramer remarked on October 7th: “And we also know Starbucks is coming, you know, I think it’s coming back under Brian Niccol.”
The comeback that Cramer was talking about is the turnaround that Niccol and the team have been focused on since 2024 after the CEO took over the helm. The turnaround is focused on shutting down weak performing stores and letting go of retail employees along with simplifying the menu and improving operational speed. Yet, even though it’s in the midst of a tough turnaround, Starbucks nevertheless featured in our list of 10 Best Beverage Dividend Stocks To Buy According to Hedge Funds.
On this front, Starbucks’ global comparable sales grew by 7.9% in its fiscal third quarter while North America same store sales grew by a stronger 8.1%. Starbucks’ operating margin also expanded by 430 basis points to indicate that the turnaround is going strong. Crucially, North America and global transaction traffic grew by 4.5% and 4.2% in the third quarter to suggest that customers were ordering more. Looking at the data points, Niccol’s assertion – and Cramer’s reporting – of a Chipotle acquisition derailing the turnaround make sense.
Have Cramer’s thoughts about Starbucks changed in a year? Read Jim Cramer Discusses Starbucks (SBUX)’s Big Turnaround In Detail which is from September 2025.
Looking at Chipotle and considering the bearish factors about Starbucks, the turnaround could very well have been stake if the firm had gone ahead with an acquisition. With the US beef prices continuing to remain at record highs and higher fuel prices creating additional troubles, restaurant-level and GAAP operating margins fell to 25.2% and 15.7%, respectively, from an earlier 27.4% and 18.2% in the second quarter. Not to mention, EPS remained flat at $0.33 while transactions grew by a paltry 1% and cyclospora’s impact in July created doubts about third quarter performance. Yet, while Chipotle is struggling, it ranked #2 on our list of 11 Best Restaurant Stocks to Buy Right Now. Think you can guess the #1 stock? Hint: It’d be unsurprising.
Consequently, with Starbucks’ revenue dropping by 1.4% on a consolidated basis in the third quarter, an acquisition of a business struggling with inflation could complicate the picture for Starbucks.
Shifting towards hedge fund sentiment and valuation, 64 funds disclosed a stake in Starbucks in Q2 while the figure was 63 for Chipotle. Looking at the shift in the disclosure over Q1, it appears that hedge funds are more pessimistic about beef prices than the turnaround. In Q1, Insider Monkey’s data shows that 68 funds had disclosed a stake in Chipotle while the figure was 65 for Starbucks. However, the forward P/E multiple of 30.86 of Starbucks pencils in a yield of 3.24% to hint that the low figure is valuing the firm on a long term basis. For Chipotle, the forward P/E of 28.17 is still higher than the S&P 500 and the restaurant sector and pencils in a yield of 3.55% to imply a long-term growth prioritization and little room for execution missteps.
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This article is originally published at Insider Monkey.
