Dan Jacome

Chipotle Mexican Grill Q4 2007 Earnings Call Transcript

Quick take on the quarter:

Net net the long term fundamental story is intact. Company missed EPS for the first time in the company's history, but 1c was non-recurring item. Also, mgmt has proven conservative with comps guidance, and this time, the St took the stock down. The only concern is valuation; unit economics are on fire, still, each new store generating 40% ROI.

Valuation now @ 35x 08 numbers, we are looking at 25% EPS growth presumably over next 12-18 months. The opportunistic buyer will wait for the stock to come in bit, but we may not see that. Tons of people made $ on this name, many did not and fresh capital will get interested in the longer term story if the stock breaks 90. Today, we saw it reverse pretty quickly on 4x avg daily volume.

At 700 units (~$150M CAPX projected in 08, all of it can be funded internally), I think the CMG story is in the 4th/5th inning and we are nowhere near saturation -- If these guys can raise prices in a "poor" economy, think what they could muster when the US is cooking; they'll need the price raises to offset the input (corn/chicken) increases, byproduct of the ethanol boom, which has popped feed prices like a basketball released from underwater.

Bottom line: the concept travels well, the secular push for high quality ingredients is a nice backdrop, and I'm betting on Steve Ells the founder to help CMG survive through the current stagflation cycle.