this is great. current pessimism likely setting up currently inexpensive call options for unusual gains on Friday after earnings announcement. look at Google's history. my guess is that those who go long call will make unusually large gains. but what do i know...everybody else hates google...for now...
about one year ago, my company was contacted by salesforce.com to explore their product array. by the end of the call it had occurred to me that salesforce.com was very similar to a sophisticated rolodex. when they discussed pricing at $125k/year, i was shocked at the pricing for our small business. since then i have noticed many competitors offering their services at a fraction of the cost.
now the larger tech players oracle, etc are encroaching on salesforce's space. with as many choice we now have to pay more or, in our case, much less for a comparable product, I would be shocked if salesforce met it lofty future earnings and profit targets. yes, they hire the most attractive sales people from the top business schools. they are not hard on the eyes.
but when it comes down to functionality, does it really make sense to pay a lot more for a product that is overpriced for what it delivers when comparing to competitors?
it seems hard to imagine that salesforce is trying to brand itself as a premium product (such as neiman marcus or coach) when basic products would work equally well.
might I remind you that CRM's 90+ P/e has embedded in it very very high rates of growth in earnings?
Retail Sales Growth Has Run Out Of Steam [View article]
Here's food for thought: $16mm miss on revenue. At $8/burrito (roughly), that's 2 million units. Each person eats, lets say, weekly one Chipotle burrito and 12 per quarter.
That amounts to 166,667 fewer people eating burritos. At 1,300 stores, each store has lost 128 customers per quarter on average!
Look out below! Technical Traders will move the stock lower over the short term.
Institutional Investors will drive the stock lower over the longer term.
CMG has had a nice run. Really nice!
Ultimately, lofty expectations have already been built into the stock's soaring valuation, to a point where, the company was apparently forced to cut corners and even commit felonies to try to meet earnings targets. Sad, really, when you think about it.
One more thing: Goldman Sach has more egg on its face. A Goldman Sachs analyst recommended buying calls options on Chipotle a few days ago. If it turns out that they sold into strength ahead of the weak earnings announcement and subsequent stock collapse, there will be suspicion of pumping up the stock for their personal gain. Look out for any possible legal action in this area.
Retail Sales Growth Has Run Out Of Steam [View article]
I have noticed that over the past couple of weeks, Chipotle has not been its usual self. What I mean is that when there are accusations of potentially detrimental events to it's stock price, their public relations effort is ubiquitous attempting to refute and quash such accusations.
Over the past month, after the claims of the SEC labor felony investigation to accusations of them not using truly "natural" products, or their core business strategy, the Chipotle Public Relations department has been curiously silent.
I was just wondering if anybody else noticed that. Just an observation.
Why Investors Should Avoid Chipotle Mexican Grill And Boston Beer [View article]
funny thing is that chipotle's appeal has been his "conscientiousness".
In May, the SEC announced the beginning of a 2year investigation into fradulent/unfair labor practices.
Today, there is a lawsuit announced against CMG which refutes it's single most important appeal, which is that meat sold is farmed "naturally".
I am curious, what else CMG is hiding that could harm the premium to earnings that it currently enjoys? 53.84x P/E.
What would be the appropriate p/e if it turns out that cmg is no different than the other burrito restaurants? 30x? That might be a long way down for CMG from here, I surmise
Why I Don't Agree With Analyst Optimism Regarding Chipotle [View article]
As a actual consumer, I must say I was not particularly impressed. Apparently analysts haven't actually purchased a burrito at Chipotle. It has been awhile since i have eaten at one so I am digging deep to recollect my experience. In case you are wondering, I haven't been back because I considered the burrito overpriced for a burrito that was very light on meat (a few scant traces from the restaurant in Pennsylvania).
As a selected my a la cart ingredients, all the items were straightforward. I thought, what is the big deal about their product. When I got to the end of the assembly line, I was asked if i wanted guacamole or sour cream. Hesitantly, I asked, does it cost extra? I received a sheepish "yes". Then a long pause as I pondered if I wanted to pay the extra 16% for guacamole, almost embarrassed, I replied, "not today".
The clerk, almost feeling sorry for me said: "well, it'll throw it in for free". Grateful, I proceeded much down on my burrito. Unfortunately, I found the burrito heavy in beans and rice and light on meat. Was it tasty? Sure! Would it make me go back for another? Not on a regular basis. When I consider that it costs me probably $2, maybe $3 to make myself, I almost cant stand the idea of paying 4x for a good burrito. Not great, but good.
Let me circle back on the economics. I supposed Chipotle hope customer would order add-ons. That way, the relative profit margin would accrue to them. Unfortunately, guacamole is highly perishable and sour cream also but holds a longer shelf life. The fact that I did not want the add-ons because of the additional cost does not bode well for net income. Still worse, when restaurants give out charity toppings that are expensive, that reduces net income still.
Does that make any sense to real consumer, not the theoretical consumer that dealer research analysts (who likely make well over $100,00 per year) would like you to believe?
One of the responders to this article apparently is one of those dealer research analysts making over $100k per year. I suspect most of Chipotle's consumers don't make over $100k per year. I found interesting his rationale. You should buy Chipotle stock because they sell "antibiotic-free meats and locally grown". Ok so, I would be unsatisfied and grow sick by instead continuing to buy a 6-inch Wawa hoagie for $4.50, loaded with a variety of topping which outnumber the two Chipotle offers (guacamole and sour cream) by 10-times?
The problem is that people eat burritos why? Sometimes I crave burritos. Mostly I want something tasty to eat at a bargain because I need energy but want to eat something relatively nutritious. Unless I make more than $100k per year (as many of the dealer research analysts do), I don't care for as much for "antibiotic-free meats and locally grown" as I do about value and nutrition. If most Americans are like me, I am going to go out on a limb and claim that their experience has been similar.
I do have one theory that i would like to throw out. Same store sales remaining " the same" is not because the same people dine there. It is a cycling of new folks who, like me, wanted to try it out. You can escape detection if the area is a rapid population growth neighborhood. At some point, each restaurant will run of new newbie's to taste test. I suppose this could go on for awhile. I have my doubts that such a strategy can contribute to a steady growth rate of net income.
For this reason, I believe Chipotle is nothing special. It's lofty p/e is gambling. One bad quarter, and it will be Netflix redux. The other thing to consider is that momentum stocks, as this one is, means that its run will come to an end at some point. The problem is that the Fidelity's of the world, own such much stock, that when it decides to "underweight" the stock (a euphemism for "they are nervous they are nervous about losing hundreds of millions of dollars), momentum shifts are rather abrupt large blocks get sold as once. Another code words owners use is "rotate out of to make room for another investment". That means they are trying to be stealthy about heading for the exits without causing a large move in the market.
Silly rabbits...
I am curious about upcoming SEC filing of the largest holders of CMG. That is, how many of them have begun to pare down their positions in Chipotle, without attempting to move the stock price dramatically. I suspect the smart money has already begun to do just that, especially since their margins could reasonably be expected to compress further (see Chipotle's conference call ie. propaganda session, about calming investors over future labor costs increases because legal employees cost more and, further, demand decline because of price rises).
I have been wrong more times than I would like to admit. I think my opinion on CMG beginning its momentum downward, might be one for the win column
But then again, I'm just a typical consumer. What do I know?
LinkedIn to Lose Steam as Competition Will Weigh on Unique Visitor Growth [View article]
I have been a registered user of LinkedIn for about five years and have resisted every attempt to pay any subscription fee. I suspect most other users feel the same way. While it's nice to connect with friends and acquaintances, I dont need to use LinkedIn to accomplish this. My alumni directory, contact lists, etc are more than sufficient. So the rubber meets the road when Linked in is faced with the reality that it will likely experience great difficulty getting its user to pay for its service. That said, margins should compress and the stock multiple drop significantly. I think LinkedIn is a great idea. I just dont want to pay for it. LinkedIn is a great idea, but it's stock valuation does not reflect anyone's reality except for insiders who are waiting for the lockout to expire.
I suppose the few (if any) bullish proponents of Linked In's stock are the venture capitalists and investment bankers who own the public stock at $45 and are waiting for their lockout period to end before dumping it.
LinkedIn to Lose Steam as Competition Will Weigh on Unique Visitor Growth [View article]
What I think is very important (perhaps most) is how Linked in could get its registered users to pay for its service. I can tell you from a personal standpoint, as a registered user for at least five years, I have never succombed to LinkedIn's efforts to entice me to pay for anything on its site. The day Linked in forces users to require to pay for its service will be the beginnng of the end. If Linked in doesn't charge it customers who refuse to pay the subscription, its margin will compress and multples drop. To me this scenario is plain as day to see. LinkedIn's market cap is a ponzi scheme but for the venture capitalists and investment bankers who own the stock at 45 and are pumping up the stock until their lockout period ends. Who loses? 401k's. pension funds, retail investors, who on own it through the Fidelitys of the world. What an incredible scam. Where is the SEC when you need them?
4 Reasons It's Time to Sell Google [View article]
Earnings Preview: Salesforce.com [View article]
now the larger tech players oracle, etc are encroaching on salesforce's space. with as many choice we now have to pay more or, in our case, much less for a comparable product, I would be shocked if salesforce met it lofty future earnings and profit targets. yes, they hire the most attractive sales people from the top business schools. they are not hard on the eyes.
but when it comes down to functionality, does it really make sense to pay a lot more for a product that is overpriced for what it delivers when comparing to competitors?
it seems hard to imagine that salesforce is trying to brand itself as a premium product (such as neiman marcus or coach) when basic products would work equally well.
might I remind you that CRM's 90+ P/e has embedded in it very very high rates of growth in earnings?
good luck to you CRM! you will need it
Retail Sales Growth Has Run Out Of Steam [View article]
That amounts to 166,667 fewer people eating burritos. At 1,300 stores, each store has lost 128 customers per quarter on average!
Wow!
5 Valuation-Based Contrarian Picks [View article]
Institutional Investors will drive the stock lower over the longer term.
CMG has had a nice run. Really nice!
Ultimately, lofty expectations have already been built into the stock's soaring valuation, to a point where, the company was apparently forced to cut corners and even commit felonies to try to meet earnings targets. Sad, really, when you think about it.
One more thing: Goldman Sach has more egg on its face. A Goldman Sachs analyst recommended buying calls options on Chipotle a few days ago. If it turns out that they sold into strength ahead of the weak earnings announcement and subsequent stock collapse, there will be suspicion of pumping up the stock for their personal gain. Look out for any possible legal action in this area.
Interesting story, Chipotle is/has been/was...
Retail Sales Growth Has Run Out Of Steam [View article]
Over the past month, after the claims of the SEC labor felony investigation to accusations of them not using truly "natural" products, or their core business strategy, the Chipotle Public Relations department has been curiously silent.
I was just wondering if anybody else noticed that. Just an observation.
Why Investors Should Avoid Chipotle Mexican Grill And Boston Beer [View article]
In May, the SEC announced the beginning of a 2year investigation into fradulent/unfair labor practices.
Today, there is a lawsuit announced against CMG which refutes it's single most important appeal, which is that meat sold is farmed "naturally".
I am curious, what else CMG is hiding that could harm the premium to earnings that it currently enjoys? 53.84x P/E.
What would be the appropriate p/e if it turns out that cmg is no different than the other burrito restaurants? 30x? That might be a long way down for CMG from here, I surmise
Why I Don't Agree With Analyst Optimism Regarding Chipotle [View article]
As a selected my a la cart ingredients, all the items were straightforward. I thought, what is the big deal about their product. When I got to the end of the assembly line, I was asked if i wanted guacamole or sour cream. Hesitantly, I asked, does it cost extra? I received a sheepish "yes". Then a long pause as I pondered if I wanted to pay the extra 16% for guacamole, almost embarrassed, I replied, "not today".
The clerk, almost feeling sorry for me said: "well, it'll throw it in for free". Grateful, I proceeded much down on my burrito. Unfortunately, I found the burrito heavy in beans and rice and light on meat. Was it tasty? Sure! Would it make me go back for another? Not on a regular basis. When I consider that it costs me probably $2, maybe $3 to make myself, I almost cant stand the idea of paying 4x for a good burrito. Not great, but good.
Let me circle back on the economics. I supposed Chipotle hope customer would order add-ons. That way, the relative profit margin would accrue to them. Unfortunately, guacamole is highly perishable and sour cream also but holds a longer shelf life. The fact that I did not want the add-ons because of the additional cost does not bode well for net income. Still worse, when restaurants give out charity toppings that are expensive, that reduces net income still.
Does that make any sense to real consumer, not the theoretical consumer that dealer research analysts (who likely make well over $100,00 per year) would like you to believe?
One of the responders to this article apparently is one of those dealer research analysts making over $100k per year. I suspect most of Chipotle's consumers don't make over $100k per year. I found interesting his rationale. You should buy Chipotle stock because they sell "antibiotic-free meats and locally grown". Ok so, I would be unsatisfied and grow sick by instead continuing to buy a 6-inch Wawa hoagie for $4.50, loaded with a variety of topping which outnumber the two Chipotle offers (guacamole and sour cream) by 10-times?
The problem is that people eat burritos why? Sometimes I crave burritos. Mostly I want something tasty to eat at a bargain because I need energy but want to eat something relatively nutritious. Unless I make more than $100k per year (as many of the dealer research analysts do), I don't care for as much for "antibiotic-free meats and locally grown" as I do about value and nutrition. If most Americans are like me, I am going to go out on a limb and claim that their experience has been similar.
I do have one theory that i would like to throw out. Same store sales remaining " the same" is not because the same people dine there. It is a cycling of new folks who, like me, wanted to try it out. You can escape detection if the area is a rapid population growth neighborhood. At some point, each restaurant will run of new newbie's to taste test. I suppose this could go on for awhile. I have my doubts that such a strategy can contribute to a steady growth rate of net income.
For this reason, I believe Chipotle is nothing special. It's lofty p/e is gambling. One bad quarter, and it will be Netflix redux. The other thing to consider is that momentum stocks, as this one is, means that its run will come to an end at some point. The problem is that the Fidelity's of the world, own such much stock, that when it decides to "underweight" the stock (a euphemism for "they are nervous they are nervous about losing hundreds of millions of dollars), momentum shifts are rather abrupt large blocks get sold as once. Another code words owners use is "rotate out of to make room for another investment". That means they are trying to be stealthy about heading for the exits without causing a large move in the market.
Silly rabbits...
I am curious about upcoming SEC filing of the largest holders of CMG. That is, how many of them have begun to pare down their positions in Chipotle, without attempting to move the stock price dramatically. I suspect the smart money has already begun to do just that, especially since their margins could reasonably be expected to compress further (see Chipotle's conference call ie. propaganda session, about calming investors over future labor costs increases because legal employees cost more and, further, demand decline because of price rises).
I have been wrong more times than I would like to admit. I think my opinion on CMG beginning its momentum downward, might be one for the win column
But then again, I'm just a typical consumer. What do I know?
LinkedIn to Lose Steam as Competition Will Weigh on Unique Visitor Growth [View article]
I suppose the few (if any) bullish proponents of Linked In's stock are the venture capitalists and investment bankers who own the public stock at $45 and are waiting for their lockout period to end before dumping it.
Where is the SEC when you need them?
LinkedIn to Lose Steam as Competition Will Weigh on Unique Visitor Growth [View article]