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Bill Ackman Effect: Activist Investor Impacts Chipotle’s Stock

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Dec. 4 2020, Updated 10:53 a.m. ET

Stock performance

The announcement that Pershing Square Capital acquired a 9.9% stake in Chipotle Mexican Grill (CMG) on September 7, 2016, led to a rise in Chipotle’s share price. Chipotle closed the day at $438.5—a rise of 5.9% from its closing price the previous day.

Pershing Square Capital is managed by Bill Ackman. Earlier, he invested in restaurant stocks such as Burger King, McDonald’s (MCD), and Tim Hortons. This increased investors’ confidence and led to a rise in the share price. However, the euphoria didn’t last long. Concerns about falling same-store sales growth, earnings before interest and tax margins, and EPS (earnings per share) led to a fall in Chipotle’s share price. As of September 20, 2016, Chipotle was trading at $400.4—a fall of 8.7% from September 7, 2016.

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In the midst of public outcry for the prohibition of the excessive use of antibiotics in meat and poultry, six non-profit organizations conducted a survey. They released a new report called “Chain Reaction II” on September 20, 2016. The report stated that the policies and procedures adopted by Chipotle and Panera Bread to restrict excessive antibiotics usage across their supply chains are the best in the industry. It isn’t known yet how customers and investors will respond to this news.

Year-to-date growth

Chipotle’s share price was struck by food safety issues in October 2015—it fell 33.8% in fiscal 2015. The company continues to struggle in fiscal 2016. YTD (year-to-date), Chipotle’s share price has fallen 10.8%. As of September 20, 2016, Chipotle’s peers such as Panera Bread (PNRA) and Shake Shack (SHAK) have returned 3.5% and -11.5% since the beginning of 2016. During the same period, the Consumer Discretionary Select Sector SPDR Fund (XLY) has returned 2.2%. XLY has invested more than 10% of its holdings in restaurant companies such as McDonald’s, Starbucks (SBUX), and Yum! Brands (YUM).

Series overview

In this series, we’ll look at analysts’ estimates for Chipotle’s revenue and EPS for the next four quarters. Finally, we’ll look at Chipotle’s valuation multiple and analysts’ recent recommendations and target prices for the next 12 months.

Let’s start by looking at analysts’ revenue estimates for the next four quarters.

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