I’ve always wanted to start an article with the exclamation “holy guacamole,” but that’s not entirely accurate for this piece. Chipotle Mexican Grill, Inc. (NASDAQ:CMG) has been a dog for a while now, and today’s 4% rout in CMG stock is more of the same.
Is the burrito chain ever going to get back on its feet? Not yet, according to M Science, who revealed in a note today that checks at Chipotle “remain weak.”
CMG has been embattled since several rounds of E. coli instances sent customers exiting in droves. It’s a problem that can be solved with some sleeve rolling and tenacity, but it also takes time and dozens of brand-positive headlines like this one and this.
In the first quarter of 2016, same-store sales at CMG slipped by about 30%, its first quarterly loss since going public in 2006. For the year so far, Chipotle stock is down about 12% and 42% over the past year.
Even through that rout, CMG stock still trades hands at 65 times earnings, well ahead of the industry average of about 25. The fast-casual restaurant reports earnings at the end of October, where we’ll likely see a drop of 25%, earnings-wise, and a 30% decline on the revenue side.
At this point, the only news investors want to hear from CMG is that the sky isn’t falling, but today’s news certainly paints a grim picture. While things may get better for Chipotle stock, it’s not likely to happen any time soon.
If you’re long Chipotle stock, strap in and pray its brand isn’t too tarnished to return to its glory days of raw growth.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
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