burrito blues: Chipotle stock plunges
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Burrito blues: Chipotle stock plunges
Shares were priced so high that any bump in the road could take them down.
Chipotle Mexican Grill (CMG -21.28%) shares plunged 23% Friday after the longtime market darling missed revenue expectations on slowing sales.
At least four brokerages cut price targets on the stock, and Goldman Sachs (GS -0.49%) booted Chipotle from its "conviction buy" list. Other restaurant chains that have seen similarly hot growth in recent years were also hit. Buffalo Wild Wings (BWLD -4.26%) was down nearly 5%, and Panera Bread (PNRA -4.19%) fell more than 5%.
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Chipotle was trading Friday at $311.85 after falling to a low of $309.01. The stock reached the $440 mark earlier this year, an astonishing rise from $40 in late 2008. Shares had been pushed up to unrealistic levels, leaving them primed for a fall.
But Chipotle's quarter wasn't actually that bad. The company just couldn't meet the high expectations Wall Street placed on it after years of rocketing growth. Same-store sales were up 8% -- what chain wouldn't love growth like that? -- but analysts wanted to see a 10.1% gain.
Profit rose 61% to $81.7 million, or $2.56 a share. That was far, far better than the $2.30 per share analysts had expected.
Revenue grew 21% to $690.9 million, but analysts were looking for $707.3 million.
Then Chipotle's executives used the "s" word -- slowdown -- in a conference call to discuss the quarter. "We were humming along nicely in the first quarter. We were humming along nicely in April. And then we saw a slowdown," chief financial officer John Hartung said. "It's pretty broad based. It's not a significant slowdown, but it is a slowdown."
Chipotle, along with the overall restaurant sector, finds itself stuck in that painful intersection of slowing consumer spending and rising food costs. If consumer spending continues to drag, expect Chipotle's same-store sales to take further hits, Raymond James analyst Bryan Elliott wrote in a client note.
Another analyst, Andy Barish at Jefferies, worried that same-store sales growth had peaked. "We are concerned about the company's lack of organic sales-driving initiatives," he added, cutting his price target on the stock to $305 from $362, according to Reuters. The stock was downgraded by Janney Capital Markets and Deutsche Bank.
Burrito blues: Chipotle stock plunges- MSN Money
