Over 20 students at Boston College got sick after eating Chipotle Mexican Grill (CMG) over the weekend (source). So far Massachusetts, Maryland, Pennsylvania, California, Minnesota, New York, Ohio, Oregon, and Washington have reported cases.
CMG has plunged back to session lows in the after-hour session.
Customers are avoiding CMG like the plague.
“When we announced the closure of 43 restaurants on November 3, company-wide comparable restaurant sales dropped for the ensuing few days to approximately -20%. The severity of the national impact was temporary, and when we announced the re-opening of restaurants in Oregon and Washington on November 10, 2015, comparable restaurant sales over the next several days quickly improved to approximately -9%. On November 20, 2015 the U.S. Centers for Disease Control and Prevention (CDC) announced four additional cases linked to the same E. coli incident; following this announcement and related negative publicity, daily comparablerestaurant sales trended down to approximately -22%. Over the past five days, comparable sales have gradually improved to an average of approximately -16%. For the full month of November, comparable restaurant sales were -16%.” – 8-K
CMG has tried to softening the blow of this news by announcing a $300M share buyback program.
Lets be honest, Chipotle is delicious. In 6 months you won’t even recall this incident while you’re savagely stuffing burritos in your face. The company has cult-like following and they satisfy demand for healthy fast-casual food which has limited alternatives.
What have you been eating on your lunch breaks?
Salads?
Ultimately I think CMG will make a for a great investment, but at what price?
3x sales is about $416. Though 3x is relatively high compared to the rest of the industry, I’d certainly be willing to put some money to work at that valuation. I find it hard to imagine the stock getting down there, but of course anything can happen.
At what price will you be buying CMG?
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