Chipotle has been one of the brightest stars in the restaurant group, boasting robust growth metrics and solid earnings – the envy of the industry. The stock has always been expensive, as the market has allowed it a greater multiple to compensate for enormous growth potential. But the recent e-Coli outbreak that originated at their restaurants has turned many investors against Chipotle. The potential damage is far-reaching, and while management has tried to halt the slide, it has not worked.
We can see the exodus from the stock in the chart below – that heavy volume selling since October says a lot. We’ve seen the effects of food-borne illness on a restaurant’s stock play out in the markets before; it will take quite a while for Chipotle to recover fully. In the meantime, there is no bottom in sight. In fact, any rally is a signal to sell, which is what’s been happening for months now.
Let others pick at a bottom. Do NOT buy any Chipotle options until the dust settles.This is clearly a bearish chart. Management has provided little guidance, and until they send a positive signal, any pop is a chance to short the stock.
Chipotle (NYSE: CMG) Video Chart Analysis
Take a deeper dive into the chart action on NYSE: CMG and learn how to read the technicals and analysis as Bob Lang marks up our chart of the week.
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About Chipotle
Chipotle Mexican Grill, Inc., together with its subsidiaries, develops and operates fast-casual and fresh Mexican food restaurants. As of November 10, 2015, it operated approximately 1,900 restaurants, including 17 Chipotle restaurants outside the United States and 11 ShopHouse Southeast Asian Kitchen restaurants. The company was founded in 1993 and is based in Denver, Colorado.
