Will Chipotle Pizza Business Boost CMG Stock?

by Burke Speaker | December 19, 2013 10:25 am

Fast-food chain Chipotle (CMG[1]) is moving beyond Mexican and adding pizza to its family — a move designed to broaden its company holdings that could help give CMG stock a lift.

chipotle-cmg-stock-pizza[2]CMG is investing in the casual pizza dining restaurant called Pizzeria Locale, based in Denver.

Chipotle is considering two additional restaurants in the city, and then will make an announcement as to whether it will expand nationwide, according to a Chipotle spokesperson.

The pizza place operates much like Chipotle’s model: Customers decide what they want on each pizza and the pies are fired up and served within minutes of ordering.

“Opening Pizzeria Locale using a model similar to Chipotle allows us to make extraordinary pizza, made with high-quality ingredients accessible to everyone,” said Steve Ells, CEO of Chipotle, in the release.

The decision to add pizza to mix may be due in part to Chipotle feeling increasingly comfortable in its position, but realizing it needs to grow.

And as USA Today notes, “this is not the first time Chipotle has ventured into areas other than Mexican food: The company also operates six ShopHouse Southeast Asian Kitchen restaurants in Washington and Los Angeles.”

CMG stock dropped big-time in 2012, though has been recovering.

Still, Chipotle needs to keep growing to keep Chipotle stock afloat.

Shares of CMG stock recently hit all-time high of just under $550 before pulling back slightly.

This week Chipotle had its “hold” rating reiterated by equities researchers at Deutsche Bank. The analysts wrote, “After a year of surprisingly strong stock performance against sluggish fundamentals, our biggest concern heading into 2014 is that investors decide restaurant stocks are too expensive and seek out better values elsewhere. ….At the same time LT earnings growth rates are coming down as many established players mature and as consumer confidence and income growth remain below pre-recession peaks. This set-up leaves the group vulnerable for a correction, in our view.”

Certainly expansion could help CMG stock — but it remains to be seen how much pizza can help.

CMG stock is up 74% year to date.

  1. CMG: http://studio-5.financialcontent.com/investplace/quote?Symbol=CMG
  2. [Image]: https://investorplace.com/wp-content/uploads/2013/12/chipotle-cmg-stock-pizza.png

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