On July 10, Mizuho Securities downgraded Chipotle Mexican Grill (CMG) from “neutral” to “underperform.” Following the downgrade, Chipotle’s stock price fell. By the end of the day, Chipotle was trading at $454.21—a fall of 2.1% from the previous day’s closing price.
After losing 23.4% of its stock value in 2017, Chipotle has returned 57.1% in 2018. Chipotle’s stock price was driven by the appointment of Brian Niccol as the company’s new CEO and strong first-quarter earnings. In the first quarter, Chipotle outperformed analysts’ EPS estimate of $1.57 by posting $2.13. The company beat analysts’ SSSG (same-store sales growth) estimate of 1.3% by posting an SSSG of 2.2%.
Shake Shack (SHAK) and The Cheesecake Factory (CAKE) have returned 47.5% and 18.1% YTD (year-to-date), respectively. During the same period, the S&P 500 Index (SPX) and the Consumer Discretionary Select Sector SPDR ETF (XLY) have returned 4.5% and 13.3%, respectively.
For the next four quarters, analysts expect Chipotle to post revenues of $4.95 billion—a rise of 8.6% from $4.56 billion in the same four quarters of the previous year. Analysts also expect the company’s EPS to rise 44.4% to $9.36 during the same period.
As of July 10, Chipotle was trading at a forward PE multiple of 42.7x—compared to 31.0x at the beginning of 2018. The rise in Chipotle’s stock price increased its valuation multiple. On the same day, Shake Shack and The Cheesecake Factory were trading at a forward PE multiple of 97.0x and 20.3x, respectively.