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Chipotle or Shake Shack: Which Is a Better Pick?

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Chipotle’s stock performance

After delivering a strong return of 49.4% last year, Chipotle Mexican Grill (CMG) has continued its upward momentum in 2019. The company’s stock has risen 69.4% YTD as of June 17. Chipotle’s impressive performance in the fourth quarter of 2018 and the first quarter of 2019 has led to a rise in the company’s stock price.

In the first quarter, Chipotle posted adjusted EPS of $3.40, outperforming analysts’ expectations of $3.01 by 13.0%. Its revenue came in at $1.31 billion, beating analysts’ expectation of $1.27 billion by 3.1%. Also, the company posted better-than-expected same-store sales growth of 9.9%. Chipotle’s management credited the implementation of digital advancements like order ahead, delivery, catering, digitized second make-lines, and mobile order pickup shelves, and its compelling marketing for the strong sales in the first quarter. The strong first-quarter performance and investor optimism surrounding the company’s implementation of digital advancements had led the company to hit a 52-week high of $749.25 on June 13.

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Shake Shack’s stock performance

Although Shake Shack (SHAK) has failed to match the returns of Chipotle this year, it has outperformed the broader equity market. YTD, Shake Shack has returned 48.6%, while the Consumer Discretionary Select Sector SPDR ETF (XLY), and the S&P 500 Index have returned 19.7% and 15.3%, respectively.

The better-than-expected sales in the fourth quarter of 2018 and the first quarter of 2019 had led to a rise in SHAK’s stock price. SHAK reported its first-quarter results on May 2. During the quarter, the company outperformed analysts’ SSSG and revenue expectations. The company’s EPS was in line with analysts’ expectations. Also, after reporting its first-quarter earnings, the company’s management had raised its SSSG and revenue guidance for 2019. The strong first-quarter performance and improved guidance had led to a rise in SHAK’s stock price. As of June 17, the company was trading at $67.51, which was 66% higher than its 52-week low of $40.67 and 3.7% lower than its 52-week high of $70.12. You can read our analysis on SHAK’s first-quarter performance in Shake Shack: Higher Sales Guidance after Q1 Results.

 

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