Please ensure Javascript is enabled for purposes of website accessibility

Why Chipotle Stock Jumped Again Today

By Jeremy Bowman - Mar 20, 2020 at 1:19PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the burrito chain gained again on the apparent impression that the stock was oversold.

What happened

Shares of Chipotle Mexican Grill (CMG 4.59%) were climbing today for the second day in a row, as the market seemed to rebalance after investors bought back consumer discretionary names -- including restaurant stocks that have been hit hard in recent weeks -- and sold off consumer staples and defensive stocks that have outperformed during the crisis.

Though there was no specific news out on Chipotle, investors seemed to believe that solid restaurant stocks like Chipotle will eventually bounce back from the crisis and see them as oversold for now. Shares of the burrito chain were up 6% as of 12:21 p.m. EDT.

A Chipotle burrito with a side of guacamole

Image source: Chipotle.

So what

Chipotle appears to be in a significantly stronger position than many of its competitors. The burrito chain has no debt and has invested significantly in digital and delivery capabilities, which should give it an advantage during the coronavirus crisis. The company also said that delivery would be free for customers during March, and has partnered with Uber Eats to expand its delivery reach.

Unlike most fast-food chains, Chipotle doesn't franchise its restaurants, which may give it more security than its peers since it doesn't have to worry about propping up franchisees. Further, its employees all have benefits like sick leave, which may make them more loyal than those of other restaurant chains right now.

Meanwhile, the epidemic has forced restaurants across the country to limit themselves to takeout and delivery, which could put some out of business, giving the burrito roller an opportunity to grab market share during the recovery.

Now what

Financial results for Chipotle over the next quarter or two, at least, will be ugly, and the chain is likely to post significant losses. That means the market sell-off may not be over, as we still don't know how long the outbreak will last or what its economic impact will be. Still, when the economy and the market do recover, the burrito chain looks like a smart bet.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
CMG
$1,402.42 (4.59%) $61.51

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
356%
 
S&P 500 Returns
124%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.