Chipotle stock took a hit Friday. Image: Chipotle Mexican Grill.
The stock market completed an impressive rebound from last week's declines, gaining back almost all of the ground it had lost. Yet even amid solid gains in Friday's session, many stocks posted substantial declines, and Chipotle Mexican Grill (CMG 2.21%), Nimble Storage (NYSE: NMBL), and Mentor Graphics (MENT +0.00%) were among the biggest decliners on the day.
Chipotle Mexican Grill fell 12% after the Centers for Disease Control announced that new reported cases of E coli bacteria outbreaks linked to the restaurant chain's locations have now arisen in a total of six states. Initial reports had suggested that the incidents might end up isolated in the Pacific Northwest, but new cases in New York, Ohio, and Minnesota broadened the scope of the problem. As of Thursday, none of the 45 people infected in the outbreak had died, but 16 had been hospitalized. In its statement Friday, Chipotle said that it has "taken aggressive steps to make sure its restaurants are as safe as possible," and co-CEO Steve Ells said, "We offer our sincerest apologies to those who have been affected." Even though Chipotle noted that roughly 265,000 cases of E coli occur every year, the stock is likely to see continued volatility until the scope of the problem stops expanding.
Nimble Storage lost half its value on Friday after the enterprise-storage specialist reported slower-than-expected revenue growth and a quarterly loss that was only a penny less than the consensus forecast among investors. In addition, investors reacted negatively to company comments suggesting that further earnings pressure would continue into the future, despite the fact that the company's efforts are intended to produce larger gains in the future. Nimble Storage does face an increasingly competitive environment in supplying storage-hungry businesses turning to data analytics and cloud-computing initiatives, and some believe that its efforts to keep growing will end up thwarted by rivals. With the stock price down so far, some believe Nimble could become a takeover target, but no one seemed willing to make that bet in today's session.
Finally, Mentor Graphics plummeted 36% as the chip design and manufacturing tools specialist predicted huge declines in current-quarter revenue and earnings. The company already saw slight drops in sales that led to an 18% drop in adjusted earnings, but Mentor thinks that revenue could plunge by almost a quarter and sales could end up getting cut by more than half. Part of the problem that Mentor faces is that the semiconductor industry has gone through extensive consolidation and could continue to see continued merger and acquisition activity. That in turn makes it more difficult for Mentor to grow its business, forcing the toolmaker and its rivals to fight for a shrinking pool of business overall. Unless new semiconductor companies start to emerge to replace those that are disappearing through M&A activity, Mentor Graphics could remain under pressure to try to deliver on the high expectations of its shareholders.
