Categories Analysis, Consumer

Chipotle Mexican Grill (CMG) stock in cautious stance on growth concerns

Shares of Chipotle Mexican Grill Inc. (NYSE: CMG) opened higher on Monday but dived into the red territory on future growth concerns. The stock has been under tremendous pressure and has fallen over 17% since reaching a record high of $940.28 on February 20. Also, the coronavirus outbreak continues to pressurize the restaurant industry.

There were more than 82,000 confirmed cases of coronavirus worldwide and the virus is spreading quickly outside the China region. As of Friday, there were only 59 confirmed cases in the US and the public health officials fear that the virus is likely to spread at a faster pace. Many experts believe the rapid spread has made the virus a global pandemic.

Restaurant
Image for representation. Courtesy: Zakaria Zayane on Unsplash

This continues to put more pressure on restaurant firms, who are developing a pandemic plan. Already, the contingency plans were carried out by the government authorities in order to prevent the spread of influenza by canceling mass gatherings and school closures. This is likely to hurt the restaurant firms both in the near-term and long-term.

In the near-term, the company’s margins and profits are likely to be threatened by variance in food safety protocols and national concerns from current and former employees. Along with this, the restaurants remaining shut due to coronavirus could increase the costs and lessen the profitability.

As of December 31, 2019, the company operated 2,580 Chipotle restaurants throughout the US, 39 international Chipotle restaurants, and three non-Chipotle restaurants. The company, which opened 80 new restaurants in the fourth quarter, plans to open a significant number of new restaurants in the next few years.

Also Read:  Walmart (WMT) sees fresh wave of panic buying as COVID curbs return

For the fourth quarter, Chipotle reported a 122% jump in earnings as a 13.4% increase in comparable restaurant sales and new restaurant openings drove the top line higher. Digital sales grew 78.3% and accounted for 19.6% of sales.

Read: Papa John’s Q4 earnings

For fiscal 2020, the comparable sales growth is expected to be in the mid-single-digit despite significant restaurant-level margin expansion. The company could be beneficial by the cautious shift to more personalized marketing for loyalty members, who are expected to increase the frequency and spend. This could drive transaction growth and margin expansion.

The shares of Chipotle ended Monday’s regular session down 0.62% at $768.81. This is below the 50-day moving average of $874.98 and the 200-day moving average of $827.94. Despite showing a negative performance outlook in the near and long-term, the stock at current levels remains nearly fair-valued.

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

Most Popular

Walt Disney (DIS): After a tough FY20, the pandemic is likely to take a toll on operations next year too

The Walt Disney Company (NYSE: DIS) had a tough time in fiscal year 2020 with the COVID-19 pandemic bringing its operations to a standstill like never before. The company incurred

Earnings reports to watch for the week of Nov. 30

The recent optimism about economic recovery waned slightly this week after jobless claims increased more-than-expected to about 778,000 amid concerns over a resurgence in coronavirus cases. With the healthcare system

Yunji Inc. (YJ) Q3 2020 Earnings Call Transcript

Yunji Inc. (NASDAQ: YJ) Q3 2020 earnings call dated Nov. 26, 2020 Corporate Participants: Kaye Liu -- Investor Relations Director Shanglue Xiao -- Chairman of the Board of Directors and Chief Executive Officer Chen

2 thoughts on “Chipotle Mexican Grill (CMG) stock in cautious stance on growth concerns

Comments are closed.

Top