Why Chipotle Stock Was On Fire

 Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chipotle Mexican Grill (NYSE: CMG  ) were sizzling today, climbing as much as 14% after the company posted strong sales in its third-quarter earnings reports.

So what: The burrito chain actually missed on earnings expectations, delivering a per-share profit of $2.66 against expectations of $2.78, due to higher food costs, but the high-flying fast-casual star has always been a growth story and investors know that bottom-line profits will eventually follow with top-line sales. Revenue in the quarter jumped 18% to $826.9 million, beating estimates of $820.3 million, and, better yet, same-store sales bumped up 6.2%, topping the consensus at 4.7%. Management said it expects the strong organic growth rate to continue in the fourth quarter, and may raise prices 3% to 5% next year to counter rising food costs.

Now what: Even though Chipotle missed earnings estimates, this was about as good of a quarter as investors could have asked for. The 6% comp seems to indicate that long-rumored threats such as Taco Bell's new Cantina Bowl lineup have not taken a bite out of the category leader, and that individual stores have not reached capacity, despite long lines, as some had feared. With nearly 200 new store openings on line for 2014, and an expected price increase, Chipotle should have no problem maintaining its hot growth rate into next year. The valuation may be too hot for some, but with only 1,500 total locations, Chipotle still has plenty of room to run.  

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  • Report this Comment On October 18, 2013, at 3:30 PM, turbotoots wrote:

    Thanks for the article. I want to personally thank David Einhorn for announcing his short on CMG in summer of 2012 at $450. I always wanted to buy in, thought I had missed the boat, as it climbed highr. I bought a $215 call option on 10/23/2012 for $52 when the stock had dropped to $233. The option was up $70 TODAY, and up 457% since purchase.

    What is the name David and Tom gave to something that increases over it's initial investment in a single trading day?

    This is my first, and I can't remember,

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9/29/2016 9:46 AM
CMG $419.35 Up +1.04 +0.25%
Chipotle Mexican G… CAPS Rating: ****