A very wildly popular stock that may be overpriced is Chipotle Mexican Grill (CMG). On Barchart the stock has been appreciating but lately has taken a breather, possibly signaling that it's overpriced. The company has started to go off in a new direction and is opening locations under the name ShopHouse Asian Kitchen. The same concept it has now ... move along a line and pick all your own ingredients but under an Asian theme.
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Chipotle offers a focused menu of burritos, tacos, burrito bowls and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in a distinctive atmosphere. Through its vision of food with integrity, Chipotle is seeking better food not only from a variety of fresh ingredients, but ingredients that are sustainably grown and naturally raised with respect for the animals, the land, and the farmers who produce the food. The first ShopHouse Asian Kitchen will open this summer in the Washington, D.C., area so we'll see what happens.
Factors to Consider
Barchart technical indicators:
- 64% Barchart technical sell signal
- Trend Spotter buy signal
- Above its 20, 50 and 100 day moving averages
- 11 new highs and up 6.60% in the last month
- Relative Strength Index is 57.89%
- Trades around 286.45 with a 50 day moving average of 275.30
Fundamental Factors
- Wall Street brokerage analysts have issued six strong buy, two buy, 13 hold and four negative reports on this stock.
- Sales are expected to increase by 19.40% this year and another 16.90% next year.
- Earnings are projected to increase by 20.70% this year, 23.60% next year and continue by 20.30% annually for the next five years.
General Investor Sentiment:
- The individual investor as measured on Motley Fool has expressed an 88% positive opinion on these shares.
- CAPS members vote 2,248 to 375 that the stock will beat the market.
- The more experienced All Stars agree with a 904 to 88 vote.
Summary: Chipotle Mexican Grill has been popular since its IPO spin-off from McDonald's (MCD) ( at the time Mickey D owned 91%) in 2006. With consensus projections of double digit growth in sales and earnings there is not doubt that the stock should beat the market, but by how much is the question. I think the shares are fully priced and include the double digit growth. Unless the Asian Grille concept is a big hit I look for an 8% - 9% annual total return over the next five years. If you buy I would advise a stop loss at the 100 day moving average to protect yourself if there are sales or earnings disappointments in the future.
