Chipotle Mexican Grill (CMG) Stock: Has The Grill Burnt Out?

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Chipotle Mexican Grill, Inc. (NYSE: CMG)

Chipotle Mexican Grill may have food that tastes amazing, but if you’re thinking about eating up their stock, you may want to put the fork down! The company is struggling… in a big way! Unfortunately, those struggles aren’t likely to end any time soon. Today, we’ll talk about why CMG is having such a hard time in the market and what we can expect to see from the stock moving forward.

Why Chipotle Mexican Grill Is Having Such A Rough Time

The issues that CMG are facing are two fold. Here are the problems that are kicking the stock down…

  • Earnings – The declines on the stock first started in October when Chipotle reported its Q3 earnings. Unfortunately, the numbers reported simply weren’t up to par. In terms of revenue, analysts expected to see CMG report $1.22 billion earned in the quarter. However, the company was only able to produce $1.20 billion. When it comes to earnings, Chipotle produced $4.59 per share, $0.04 below expectations. As a result of the poor earnings report, CMG started to fall in the market, but the problems for the stock soon got worse.
  • E. coli – There are few things that have the ability to reduce sales at a food chain at a faster rate than E. coli. The reality is that when consumers start to get sick, other consumers stop purchasing products. That’s exactly what CMG is seeing at the moment. In early November, we started to see reports of E. coli in patients that recently visited Chipotle. Soon, the number of reported incidents grew to 19. Now, we’ve seen 52 reported instances of E. coli in Chipotle customers. This issue is crossing 9 states and causing fear in the hearts of consumers who would regularly visit CMG. As a result of the issue, CMG announced on Friday that same-store sales had decreased by as much as 20%, which could affect earnings overall by between 8% and 11% in the third quarter.

How The Market Has Reacted To The News

Any time we see poor news with regard to a publicly traded company, we can expect to see declines in the value of the stock. That’s exactly what we’ve seen from CMG. Throughout the past two months, the stock has fallen by around 30%, and it doesn’t seem as though the declines are likely to come to an end any time soon. Currently (10:54), CMG is trading at $547.89 per share after a loss of $3.86 or 0.70% so far today.

What We Can Expect To See From CMG Moving Forward

In simple terms, put a fork in it! It’s done! While CMG may have been able to recover from the poor earnings report relatively quickly, when a brand is in the minds of consumers as a dangerous brand, a recovery is slow and anything but steady. The bottom line is that sales at Chipotle are likely to stay down for quite some time. This is going to weigh on future earnings reports and on the minds of investors. As a result, I’m expecting poor activity out of CMG moving forward. With the E. coli outbreak fresh in the minds of consumers, it simply doesn’t seem as though CMG is going to be able to pick up sales any time soon.

What Do You Think?

Where do you think CMG is headed and why? Let us know your opinion in the comments below!

[Image Courtesy of Wikipedia]

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