Chipotle Mexican Grill: What's Pushing Shares Down?

It’s been all downhill for Chipotle Mexican Grill Inc. (CMG) ever since reporting first quarter results that were admittedly pretty good. Driven by new restaurant expansion and comparable-restaurant sales rising 10% on an increase in visits, the company to posted a profit of $0.52 per share, beating estimates, on revenue that grew 29% to $305.3 million. However, since Apr. 29, the shares have fallen 14.7% and the percentage decline looks even worse when you consider that the 52-week high is $155.49.

So, what's the problem? One of the major uncertainties plaguing Chipotle is the effect of higher food costs that are expected through the rest of 2008 – commodities like rice, corn and meat, as well as potential price increases to the menu that might help out margins, but at the same time might deter restaurant goers. Keeping that in mind, estimates have surprisingly remained firm, with the consensus analyst forecast calling for full year earnings per share of $2.69, which translates into 26.2% growth over the prior year on revenue of 1.37 billion.

Although the valuation has come down quite a bit, reflected in the stock now trading at a more palatable 32 times forward earnings, there is downside to the numbers as analysts are likely to express concern about the current environment and make revisions to estimates in the near future. In fact, it’s incredulous that there haven’t been any made already. Having just broken through support at the Mar. 10 low of $90.57, the stock is probably heading down to test the Aug. 2007 lows in the upper 70’s. It’s a falling knife you don’t want to catch.

Comments

[secmaven]

A new Chipotle just opened in Brea CA., an Orange County upscale community in the epicenter of the CA real estate meltdown. There are lines of people waiting to buy its products even though CalMex food is available at lower (and higher) prices in literally dozens of places in this restaurant's marketing area. Higher food costs, the latest analyst's scam theory, justifies the price collapse? No. it is profit taking by the folks who bought in big at the outset. When they get their basis down to zero reality will return and Chipotle will be up, up and away again.

[NextelAccessories]

I am still long on this, great product!

[THome]

The analyst do not get it. This is a great restaurant, that has fast service and delicious food at an affordable price. Every time I go there it is packed with people. We understand that food prices are going up, which will force resturant prices up, but they are still a better alternative to the other fast food choices. There is a negative mindset out there that does not understand value.

[briatx]

Apparently no one here gets it...

Its very simple: "the stock now trading at a more palatable 32 times forward earnings"

The stock is priced for hype, not reality. No surprise then its falling, especially as we head into recession.

[whenthemusicstops]

Expansion plans have simmered to offset recessionary impact. By fall we'll se a p/e in the 20's.
Longs will enjoy 10-15% gains for several years following.
I will glady pay .50 extra for my burrito when they raise the menu prices. It is still a well marketed unique eatery.
$135 in 2010.
No shares currently owned.

[canbyte]

I say the bottom comes when BO gets elected (or just before). But I wont buy until after the USD crashes and gold stops rising to the $2-3k range.

[Junkie]

The customer that Chipotle attracts is the kind that won't mind paying a little extra for good food. This is a little luxury for the family that is seeing it's wallet a little lighter due to gas prices and everything else going on. Chipotle, although high in calories, doesn't suffer from the same concern about helath that other fast foods places do. The operations are a well oiled machine and its simple menu is made for profit. It also still has room to grow. I like it.

[tagthatstock]

CMG has peaked on momo and valuations. lets do some simple comparisons:

CMG $92 fair value is $45
Shares Outstanding5: 32.98M
Float: 31.93M
Diluted EPS (ttm): 2.27

CALM $31 fair value is $100
Shares Outstanding5: 23.71M
Float: 14.23M
Diluted EPS (ttm): 5.64

yes 1 is a restaurant and the other a raw food producer-------if you are arguing they in dif sectors,, then i am saying your are clueless on which co has more value left in it to buy UP.

eggs,, plain and simple: cheap diet for the poor and staple product in many food products.

[Java1]

Tagthatstock-- what exchange are those comps trading under?

[Java]

Tagthatstock-- what are those stock trading on?