Not sure I agree with that thesis. Chipotle has been around for 22 years. Over that time same store sales have been rising even on stores 15+ years old. If people were tiring from the taste those stores would be flat or in decline but they weren't (prior to the e. coli).
In time people will forget and move on and start eating there again. Nobody today doesn't eat at Taco Bell or Jack in the Box because they fear getting sick. IF they don't eat at those places it is for wholly other reasons
How long the climb back will be is unknow. It could be 6 months, a year or perhaps two. I suspect if there are no more incidents and their marketing is on point they will surprise everyone with just how fast people return for the flavor they seem they can't do without.
100% agree. I was shocked because the magnitude was off the charts. I thought there would be a line but just maybe not to the door. I figured at peak lunch at least 50% to 2/3 of the tables occupied. The only time I have ever seen it even close to this was when I got there 5 minutes before it once opened and even then within 5 minutes it was busier.
The unknown here is not just if, but when patrons will return. I think that most will but there will be some permanent loss. I think some amount of the brand they promoted is forever damaged. Buffett says it takes a lifetime to earn your reputation and 5 minutes to destroy it. CMG is learning this lesson.
Now they have mass uncertainty and lawsuits galore. I agree 30x is a bit rich unless people return way faster than everyone expects. I like the stock at 300/share but you never know if investors will give a shot at that. This stock has always traded at a premium so we'll see
Why does that location baffle you? People still terrified of getting sick from eating there and not going. I went to Shake Shak in NJ which is right next to my Chipotle which I used to go 3 to 4 times a week. Shake Shack was packed. Literally standing room only.
This Chipotle is the busiest one I used to go to. I've been there as early as 11am and as late as 9:30PM where all tables are taken and line to or out the door. Last Sunday 12:30PM I was blown away as I have not even been by this location since the outbreak. There were only 2 tables taken in the entire restaurant and 1 person on line. By the time I left Shack it was a little better around 1:10PM with maybe 40% of the tables occupied and 3 people on the line.
I've never been to this location as I said without lines to or out the door and anxiety of how long we would have to wait for a table. This was pretty eery how dead it was. If Chipotle comps are not off at least 50% or more I will be shocked. Granted you won't see this for the last quarter but for January and possibly december months I think so.
This is much ado about nothing. This outbreak was from 4 weeks ago. No new cases from recent outings at chipotle. Unless we see new cases that were borne from sometime in December this is all over. All that contaminated food is long out of the system.
New strain? Howe does chipotle go 20 years without an E Coli and all of a sudden almost a dozen states have this? Foul play? Pretty bizzare. Especially if a different strain. Unless people have been getting E. Coli for years and nobody reported it?
CMG always has traded at a high multiple and will likely continue to do so. CMG has more brand equity than most other food joints and a rabid following who, in time, will forget about this incident as long as there are no more major outbreaks.
When CMG was 600 and 750 I thought it was insane. Even before the outbreak. I felt a 25 multiple at best was fair considering it was growing 15% to 20% max (more recently closer to 15%). At 750 it was trading at some of the highest multiple it has ever seen.
CMG just is a stock that rides the rails of a premium valuation. I bought it at 45 and believe me it was way overvalued there. In retrospect a great bargain though. I dumped it at 305 after Einhorn shorted it, the market freaked out and sent it to 285. I bought a small stake back in the mid to low 500 through a few purchases to average down.
I also wrote PUT's so I could get the stock at 500 or under should the stock ever fall. Now I get that chance. Chipotle will someday rebound. Its ROI on each store is
Somewhat agree. I would do the following:
5B in cash flow for 2016
Use as follows:
2.5B buyback shares NOW. Take advantage of 6.5 cash flow return on investment. Shrink float almost 8%. This means fewer shares to pay dividends down the road
1.5B to ensure debt coverage.
800M for new project funding
200M for dividends.
I would state clearly the intention is to use this short term moment in time as an opportunity to shrink the float and balance sheet and fund new projects out of cash flow. Forecast that in 2017 to 2018 the dividend policy will be re-visited. At that time if it makes sense to keep buying back shares and funding new projects or paying down debt I say keep the money inside the company. I don't need a dividend today. Rather trade it off for larger capital returns later and greater cap gains.
Hedge funds tax loss selling. Trying to get out before the other funds and one up each other. Get it out today so they can try and get back in early January ahead of other funds who drive price up. Tax loss selling requires 31 days to repurchase. Hedgie games at play
Just drove by one here in NJ about half an hour ago and line out the door. doesn't seem to be affecting folks out here one bit
any lower comps will be short lived. If Chipotle finds the source quickly, and I suspect they will, they will fix it and the short attention span american public will move on and continue to mow down burritos. This will at most be a one quarter blip which in the scheme of the next decade of 40 quarters is meaningless.
5 years from now they will be posting $40/share or more in EPS. 20 to 25 multiple gets you $800 to $1000. This assumes just 15% annual growth. 12% store growth and 3% comps.
Short termers need to bail now and give long term thinkers who want to get rich their stock at nice cheap prices. Thank you
LOL. You must not live in usa. Americans have very short memories and attention spans. This won't even be an afterthought next week.