Time to short Chipotle
A recent investigation prompts layoffs of illegal immigrants, which will surely increase labor costs.
Written by Douglas Estadt
Despite Chipotle Mexican Grill's (CMG) recently reported positive results and its all-too-tasty fajita burrito bowl, we believe shorting CMG will prove to be profitable. The company's steady rise in stock value and its recent earnings report are trumped by its current labor issue and its overrated build-up by momentum players. A recent investigation by Immigration and Customs Enforcement prompted a major layoff of illegal immigrants that will surely increase the company's labor costs. We consider these facts before shorting the stock:
- The massive labor layoff of illegal immigrants means less cheap labor, more expenses.
- CMG's P/E is about 52, while most of its competitors' P/Es are in the 20s range. The stock is quite overvalued.
- The tendency to buy only because a stock is rising leaves investors without all of the facts.
· To hear more about CMG, view the video below.Visit Wall Street Media. We feature exclusive insights from the world's leading transparent investors.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. 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 Morningstar Inc.
The solid report comes a month after the retailer closed all of its Canadian operations.
VIDEO ON MSN MONEY
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.