When you click on links to various merchants on this site and make a purchase, this can result in this site earning a commission. Affiliate programs and affiliations include, but are not limited to, the eBay Partner Network.
Yes, say JPMorgan’s John Ivankoe and team, who upgraded Chipotle Mexican Grill (CMG) to Overweight from Neutral following its earnings release after yesterday’s close. They explain why:
Upgrading shares of Chipotle with a $510 target. We believe comps are set to sequentially improve from their 1Q16 bottoms and that the Street can start to focus on earnings recoverability. We see F17 EPS as very close to F14 EPS, showing that the food safety crisis caused three full years of lost earnings despite the addition of stores from 1,785 at F14 end to 2,483 at F17 end.
In all, our call is based on Chipotle being a highly meaningful brand, that with time and expense can regain customer trust. We expect normal earnings growth to resume by F18 – after nearly doubling in F17 – and believe 20%+ EPS growth can be sustained through at least F20. Very importantly, our model does not anticipate full AUV or margin recovery to F14 levels through this term.
Our Dec-16 $510 price target is based on ~25x F20 EPS of $26 discounted back at 10% + F19 ending cash.
John Ivankoe has a pretty decent performance record.
Chipotle to Open First Burger Restaurant in Latest Non-Burrito Venture
July 28, 2016
Chipotle Mexican Grill is taking the plunge into higher-end burgers.
The burrito chain said on Thursday it would open a new hamburger restaurant called “Tasty Made” in a few months near Columbus, Ohio, serving burgers, fries and shakes and hoping to carve out the same kind of niche it has for Chipotle with a focus on what it considers better ingredients and customizable meals.
“At the heart of that is our commitment to great quality ingredients and classic cooking techniques — traits that are absolutely necessary to make the best tasting food, and that can be applied to number of kinds of cuisine,” said Steve Ells, founder, chairman and co-CEO of Chipotle, in a statement.
Echoing its strategy for its burrito chain, Chipotle said Tasty Made will use beef from animals that are raised in more humane ways and without the use of antibiotics or added hormones. The shakes will tap natural ingredients like milk, cream, sugar, and eggs. As for the buns, they will be free of preservatives, dough conditioners and other artificial ingredients, Chipotle said.
The menu will be limited, something Ells said would give the restaurant an edge. “Making only burgers, fries and shakes with really great ingredients, we think we can appeal to peoples’ timeless love of burgers, but in a way that is consistent with our long-term vision.”
At the same time, should Chipotle decide to expand Tasty Made, it will be going up against stiff steep competition in a premium burger arena occupied by the likes of Shake Shack, Five Guys and Smash Burger, not to mention a resurgent McDonald’s, which was once a major Chipotle shareholder.
Ells tapped a small team of Chipotle managers to develop the burger restaurant concept, including a chef who has won a James Beard award.
Chipotle already operates an Asian food restaurant called ShopHouse Southeast Asian Kitchen, and a pizza concept called Pizzeria Locale in Colorado.
Is it good? Is it bad? Do they just want free burritos?
People are perceiving this as a good thing which is why stock shot up over 6% in after hours.
Pershing Square is a hedge fund run by Bill Ackman. Bill Ackman is an activist investor. CMG has been having problems. Bill Ackman thinks he can fix those problems, or would like to try.
An activist investor is an individual or group that purchases large numbers of a public company's shares and/or tries to obtain seats on the company's board with the goal of effecting a major change in the company. A company can become a target for activist investors if it is mismanaged, has excessive costs, could be run more profitably as a private company or has another problem that the activist investor believes it can fix to make the company more valuable.
BREAKING DOWN 'Activist Investor'
One indication that a company may have become a target for activist investors is the filing of SEC Form 13D, which must be filed when an investor purchases 5% or more of a company's shares.
Private equity firms, hedge funds and wealthy individuals are types of entities that might decide to act as activist investors. Many well-known activist shareholders, such as Carl Icahn and Nelson Peltz, engage in their business activities through their holding companies or hedge funds.
Interestingly, it's held the $390-$395 support area pretty well for the past month. Every time a negative news piece come out, it hits the low $390's, then bounces back a bit.
Almost back to bottom of trading range/support level.
McDonald's has been benefitting from the E. coli outbreaks that sent Chipotle's sales tumbling, according to a Chipotle executive.
The burrito chain has been spending millions on free food offers and ads to lure customers back into its restaurants and assure them that Chipotle is safe to eat in the wake of the outbreaks.
But even some customers who trust that the food is safe aren't returning.
Instead, they have started going to restaurants like McDonald's and "Chipotle knockoffs," Chipotle marketing director Mark Crumpacker told the Associated Press' Candice Choi in a new interview.
The company is launching a new round of ads on Wednesday in another appeal to get customers to return. The ads will feature an open letter from Chipotle cofounder Steve Ells.
McDonald's same-store sales grew 3.6% in the most recent quarter. Meanwhile, Chipotle's same-store sales tumbled 23.6% in the second quarter. That's an improvement from the nearly 30% decline in the first quarter, but not enough of a gain to please Wall Street.
Analysts have expressed some doubts recently over whether Chipotle will ever fully recover from the outbreaks.
In a note published earlier this month, BTIG analyst Peter Saleh said the company's marketing strategy has become "stale" in the minds of consumers and that its millions of dollars in free food offers aren't working.
"The multiple promotions run this year have seen little apparent success and we believe a new approach may be necessary to drive a quicker pace of sales recovery," Saleh wrote.
In a separate note, Morgan Stanley analysts said Chipotle appears to be running out of options.
"We see no quick fix to what Chipotle really needs, a revitalization of top line, and activism's traditional tools for restaurants — spin offs, re-franchising, asset sales and cost cuts — don't appear to offer short term opportunities, leaving few obvious quick levers to pull."
Stifel analysts had an even more brutal reaction.
"We emphatically reiterate our sell rating on [Chipotle] shares following the news that Pershing Square has started a 9.9% activist position," Stifel analysts wrote in a note, referring to billionaire activist Bill Ackman taking a 9.9% stake in the company this month. "We cannot fathom Pershing's operational or mathematical investment thesis.
Chipotle (CMG) – Goldman Sachs (GS) cuts its price target on Chipotle to $395 from $445 on signs of reduced benefit from Chiptopia, its loyalty program. The promotion began July 1 and runs through the end of the month.
Interestingly, it's held the $390-$395 support area pretty well for the past month. Every time a negative news piece come out, it hits the low $390's, then bounces back a bit.
Originally Posted by AZuser
Almost back to bottom of trading range/support level.
Still stuck in a trading range. Bounced off $440 resistance on Oct. 10.
Earnings on Tues., Oct. 25. Disappointing report and/or guidance and this could break below that bottom support level.
Chipotle shares fall after report says chain still struggling to win back customers
Shares of Chipotle Mexican Grill fell more than 3 percent Tuesday after a report said traffic remains weak for the burrito chain.
According to StreetAccount, a report by M Science said checks remain weak. StreetAccount said it had no other details. M Science did not immediately respond to CNBC's request for comment.
"We announce earnings for the third quarter later this month," Chris Arnold, a spokesman for Chipotle, told CNBC. "We'll provide a full look at our financials and where things stand at that time."
Chipotle is expected to report third-quarter earnings on Oct. 25.
More free giveaways to try to win back customers...
Chipotle's latest giveaway is a BOGO offer tied to a card matching game. There's an educational component, but all that the chain wants to learn is how to get customers back into its restaurants.
This has been the year of Chipotle Mexican Grill giveaways as it tries to win back customers. The latest offer is a BOGO entree mobile coupon after playing the burrito roller's new online game.
Just like the Guac Hunter game that the chain introduced in March -- where freebie seekers had to spot differences in a digital photo hunt to win a free order of chips and guacamole -- the actual quality of the game won't impress you. A Love Story Game is just an online version of the Concentration card game where folks have to score matching sets before the clock runs out. And just like Guac Hunter you don't have to win to nab the freebie. Playing the game and then offering up your name and mobile phone number is all it takes to land a digital coupon code for a free burrito, bowl, salad, or order of tacos with the purchase of a second entree.
Chipotle just wants to get you to come back with a half-priced meal for two. Tethering it to its "food with integrity" message or a short film it rolled out over the summer is just window dressing. Chipotle may be an educator, but like an overmatched substitute teacher trying to wrestle back control of a rowdy class, it's a desperate one.
Chipotle's still smarting. It likely wrapped up its fourth consecutive quarter of double-digit negative comps, a sad feat that even bad restaurant chains rarely achieve. If sales are taking it on the chin, profitability is getting sucker punched even lower. Margins are getting squeezed as Chipotle discounts aggressively and pays up to improve its food safety procedures. Chipotle posted its first quarterly deficit as a public company during this year's first quarter, followed up by an 82% year-over-year plunge in net income during the second quarter.
From burritos to a side of chips, it seems as if there has always been some form of giveaway or promotion going on at any given time this year. Last month it culminated with free fountain beverages for high school and college students and free kid meals on Sundays. This was all happening during the third and final month of its Chiptopia program where repeat customers would be rewarded with a free meal every fourth visit in any given month. Three freebies at the same time in September may have seemed like overkill, but it was a shrewd multi-point attack to court diehard fans, social media-influenced millennials, and young families concerned about food safety.
Right now the goal is to get traffic levels back up, something that should be easier starting next month when the year-over-year comparisons will get easier since the comps slide started last November. When margins and earnings growth matter we'll see Chipotle pulling different levers.
Chipotle Mexican Grill's promotions not having 'fully desired effects'
Oct. 17, 2016
Chipotle Mexican Grill's numerous attempts to win back customers and boost sales appear to be falling flat, according to Nomura analyst Mark Kalinowski.
"The company's third-quarter promotions (including but not limited to Chiptopia) do not appear to have had the fully desired effects from the company's perspective," Kalinowski wrote in a research note Monday.
He lowered his forecasts for the company, estimating that same-store sales will be down 19.5 percent for the quarter.
Chipotle's same-store sales plunged nearly 30 percent in the first quarter, when it reported its first quarterly loss as a public company. The company swung back to profitability in the second quarter, but same-store sales declined 26.5 percent.
"We will provide a full update on our financials when we release our third-quarter earnings on Oct. 25," Chris Arnold, a spokesman for Chipotle, told CNBC.
Last week, StreetAccount noted that a report by M Science said traffic remains weak for the burrito chain.
Reports Q3 EPS of $0.27 vs $1.59 estimate (Thompson Reuters)
Revenue: $1.0 billion vs $1.09 billion estimate
Same store sales: -21.9% vs -18.2% estimate
That's more like it. Slowly giving gains back. Kinda surprised when I saw it was up considering they missed on EPS, same store sales were worse than expected, and operating margins fell.
07-21-2016, 06:52 PM
$5.66 (1.39%) 4:02PM EDT
$9.68 (-2.40%)
