What happened

Shares of Chipotle Mexican Grill (CMG 1.32%) were falling again Tuesday as investors continued to bail from restaurant stocks as the coronavirus outbreak spreads across the country. What was different about today was that Chipotle shares sank even while the broader market rallied on hopes for a stimulus bill.

Investors may be starting to differentiate between stocks likely to perform well during the pandemic (like consumer staples), and stocks tied to discretionary purchases, especially those that involve gathering places like restaurants, which are likely to take a hit.

A number of cities and states have begun ordering restaurants to close, with the exception of takeout and delivery, which is likely to hurt the burrito chain, as are the work-from-home policies most offices have adopted.

The stock fell as much as 12.4% this morning, and was trading down 6.5% as of 1:05 p.m. EDT, while the S&P 500 was up 4.1%.

A Chipotle burrito

Image source: Chipotle.

So what

Last night, New York, New Jersey, and Connecticut, which have combined population of more than 30 million people, implemented a ban on restaurants (except for takeout and delivery), and a similar law was imposed in the San Francisco Bay Area. More such measures are likely to be taken around the country to limit the spread of the virus as case counts and hospitalizations are rapidly increasing.

The burrito chain has seen strong growth in its digital and delivery channels in recent quarters, and the company announced it would offer free delivery through the end of March as it leans on that channel to replace eat-in orders that are being lost. 

Now what

There's no doubt that Chipotle's financial results are going to take a hit over the coming weeks, or more likely months. But the stock has now fallen more than 41% since the coronavirus-related sell-off began on Feb. 24, compared with a retreat of about 25% in the S&P 500

Though we're likely headed for a recession and the stock could fall further, when the economy bounces back and American life begins to return to normal, Chipotle should recover, too. This is a high-quality company with zero debt, and a strong, highly profitable economic model. For long-term investors, it's worth keeping this one on a watch list.