Burrito blues: Chipotle stock plunges
Shares were priced so high that any bump in the road could take them down.
Chipotle Mexican Grill (CMG) shares plunged 21% Friday after the longtime market darling missed revenue expectations on slowing sales.
At least four brokerages cut price targets on the stock, and Goldman Sachs (GS) booted Chipotle from its "conviction buy" list. Other restaurant chains that have seen similarly hot growth in recent years were also hit. Buffalo Wild Wings (BWLD) closed down 3.5%, and Panera Bread (PNRA) fell nearly 4%.
Post continues below.
Chipotle closed Friday at $316.98 after falling to a low of $309.01. The stock reached the $440 mark earlier this year, an astonishing rise from $40 in late 2008. Shares had been pushed up to unrealistic levels, leaving them primed for a fall.
But Chipotle's quarter wasn't actually that bad. The company just couldn't meet the high expectations Wall Street placed on it after years of rocketing growth. Same-store sales were up 8% -- what chain wouldn't love growth like that? -- but analysts wanted to see a 10.1% gain.
Profit rose 61% to $81.7 million, or $2.56 a share. That was far, far better than the $2.30 per share analysts had expected.
Revenue grew 21% to $690.9 million, but analysts were looking for $707.3 million.
Then Chipotle's executives used the "s" word -- slowdown -- in a conference call to discuss the quarter. "We were humming along nicely in the first quarter. We were humming along nicely in April. And then we saw a slowdown," chief financial officer John Hartung said. "It's pretty broad based. It's not a significant slowdown, but it is a slowdown."
Chipotle, along with the overall restaurant sector, finds itself stuck in that painful intersection of slowing consumer spending and rising food costs. If consumer spending continues to drag, expect Chipotle's same-store sales to take further hits, Raymond James analyst Bryan Elliott wrote in a client note.
Another analyst, Andy Barish at Jefferies, worried that same-store sales growth had peaked. "We are concerned about the company's lack of organic sales-driving initiatives," he added, cutting his price target on the stock to $305 from $362, according to Reuters. The stock was downgraded by Janney Capital Markets and Deutsche Bank.
More from Top Stocks
Apparently Chipotle's prices are not uniform throughout the country as I have certainly never paid $10 for a burrito there. Apparently some people don't know what a burrito is reading a few of the other comments. My advice would be if you don't like it don't eat there. As for the stock that is a different story. Over heated stock pulls back because starry eyed analysts think growth potential is unlimited. You wonder sometimes how people who are supposed to be so smart are actually so stupid.
chipotle is the only fast food resturant that serves real food and thats why ppl go there. not factory farm garbage. the prices are great. food is not a toy. its important and the prices are worth it. honesty of the animals and envirmoent as well as the consumers is whats most imporant. i dont like shadyness. i go to chipotle all the time.
I've eaten at 1 chipotle and there food is pretty good. I watch them make my steak bowl and if they give me less meat or any other condiments I tell them I want more and they will give you a little extra. Also I go right before they close so they will give you more because they don't want to have any left over after they close. Plus if you order a meal and a drink it will cost you around $10. No drink and it's under $8. There are no $10 burritos where I eat unless you add extras that cost more $ like guacamole. And you can't compare Chipotle to Taco Bell. Different quality of food all together.
When I lived in Portland Oregon, 8 years ago, I couldn't get enough of Chopile Grill...I loved their mouthwatering steak....actually I loved it all! Then I relocated moved to Washington state, and I was a disappointed that there wasn't a CG anywhere in the town I was living in. So 4 years when later I moved to Phoenix Arizona and I was ecstatic to see my favorite restaurant! I had to have a burrito bowel a.s.a.p.! I went to 3 locations at separate times. The first two was alright, although there was something missing. There wasn’t that KICK that sparked my taste buds... but I kept eating. But the last CG I dined at, the one in Surprise, I noticed that the beef was grisly... chewy. I spent longer than necessary chewing just one piece beef. But I kept eating, hoping my next bites would get better....nope. I went again a couple weeks later thinking things would be better, hoping I could get back to that flavor that hooked me in Portland...nope. I don't know, but something about the last two visits of trying to eat chewy beef....turned me off. I mean just thinking about it makes me feel like… Ugh!
MORE ON MSN MONEY
DATA PROVIDERS
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Japanese stock price data provided by Nomura Research Institute Ltd.; quotes delayed 20 minutes. Canadian fund data provided by CANNEX Financial Exchanges Ltd.
STOCK SCOUTER
StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.
126 | 258 | 459 | 600 | 671 | 683 | 602 | 455 | 271 | 113 |
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
LATEST POSTS
Try as the bears might, they couldn't break US stocks. But investors still face frothy prices and considerable headwinds.
FIDELITY VIEWPOINTS
- How to sell covered calls - Fidelity Investments
- Savvy year-end tax moves to consider now - Fidelity Investments
- Seven ways to prepare for tax changes
- Five reasons an annual review is crucial - Fidelity Investments
- Take a look at mid caps now - Fidelity Investments
- State of the sector: Health care - Fidelity Investments
VIDEO ON MSN MONEY
ABOUT
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.