My first review is for Chipotle (CMG) for one simple reason — it is delicious.
Chipotle first hit my radar last year when they had multiple reports of E. coli outbreaks and struggled to regain customers since that time. Looking at the 10 year chart below we can see that the current value of the company is similar to what it was in 2013. You can also see that this decline has been going on for quite some time, but less severely since the initial reports.
*Chart 1: Chipotle is trading at 2013 levels
Although Chipotle is still having trouble bringing back customers I think that there has been sufficient time for the price of the stock to reflect that. I also think that enough time has passed that customers will start returning. Again, I have faith that at the end of the day, Chipotle is delicious. Chipotle is so delicious that one of the victims actually asked for free food coupons as part of her settlements so she could eat more. If that doesn’t indicate customer satisfaction, I don’t know what does.
I was hesitant to buy Chipotle immediately after the outbreak because I wanted to see what kind of damage it would do to the stock and how customers would respond. This proved to be a good choice because I missed the major drop and the customer fallout that followed.
*Chart 2: The drop in recent months is much less severe than the initial drop.
A little part of me thinks that I could be wrong and Chipotle will take some time to recover. In that event, I still don’t think that the stock will drop much more than where it is at now. Looking at the same 10 year chart you can see that the large drop has passed us. This means that unless there is some unforeseen event like an additional outbreak, my upside is that Chipotle starts returning to the highs we have seen before and my downside is it stays the same, or continues to decrease on the small scale that it has seen in more recent months. Maybe it will follow that downside, but that is a chance I am willing to take.
What do you think? Leave a comment and let me know!