Chipotle Stock Fell Due to Wedbush’s Downgrade



Stock performance

On August 27, after Wedbush’s downgrade, Chipotle Mexican Grill (CMG) stock fell to a low of $493.46 before closing at $495.60, which represents a fall of 4.8% from the previous day’s closing price.

Despite the fall, Chipotle is still trading 71.5% higher than the beginning of 2018. The company’s stock price was driven by optimism surrounding the appointment of Brian Niccol as the company’s CEO in March. Chipotle also had a strong performance in the first and second quarter. To learn more, read Chipotle Reports Strong Q2 2018 Earnings, Stock Rises 5.7%.

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Peer comparisons

Shake Shack (SHAK) and McDonald’s (MCD) have returned 33.2% and -6.8%, year-to-date, respectively. Meanwhile, the broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which has invested ~8.0% of its holdings in restaurant and travel companies, has returned 17.2% since the beginning of 2018.

Analysts’ estimates

For the next four quarters, analysts expect Chipotle to post revenues of $5.05 billion—8.4% growth from $4.65 billion in the same four quarters of the previous year. During the same period, analysts expect the company’s EPS to rise 45.2% to $10.21.

Valuation multiple

As of August 27, Chipotle was trading at a forward PE multiple of 46.0x—compared to 31.0x at the beginning of 2018. The rise in the company’s stock price has increased its valuation multiple. Shake Shack and McDonald’s were trading at forward PE multiples of 84.2x and 20.0x, respectively, on the same day.


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