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Why BTIG Lowered Its 3Q17 Estimates for Chipotle

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Part 2
Why BTIG Lowered Its 3Q17 Estimates for Chipotle PART 2 OF 2

Why Chipotle Stock Is Seeing Downward Momentum

Stock performance

As of October 3, 2017, Chipotle Mexican Grill (CMG) was trading at $302.99, which represents a fall of 13.1% since the announcement of its 2Q17 earnings on July 25, 2017.

Why Chipotle Stock Is Seeing Downward Momentum

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In 2Q17, Chipotle posted adjusted EPS (earnings per share) of $2.32 on revenues of $1.17 billion. Analysts were expecting the company to post EPS of $2.18 on revenues of $1.19 billion. However, the company posted SSSG (same-store sales growth) of 8.1% against analysts’ estimate of 9.7%. The lower-than-expected 2Q17 SSSG and the expectation of a decline in SSSG in 3Q17 due to new food safety issues have made investors skeptical of Chipotle’s future earnings, which led to a fall in its stock price.

Year-to-date performance

2017 has been a tough year for Chipotle. The stock price of the company has fallen 19.7% since the beginning of this year. During the same period, the stock prices of Shake Shack (SHAK) and the Cheesecake Factory (CAKE) have fallen 7.4% and 29.4%, respectively.

The S&P 500 Index (SPX) and the iShares Select Dividend ETF (DVY) have returned 13.2% and 6.2%, respectively.

Valuation multiple

As of October 3, 2017, Chipotle was trading at a forward PE multiple of 30.4x compared to 34.8x. The decline in the company’s stock price has brought the company’s valuation multiple down. On the same day, peers Shake Shack (SHAK) and the Cheesecake Factory (CAKE) were trading at a forward PE multiple of 57.4x and 15.0x, respectively.

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