Chipotle Mexican Grill, Inc. (NASDAQ: CMG)
Chipotle Mexican Grill, Inc. (CMG), a Mexican grill company has been linked to multiple possible sickness outbreaks from customers eating at their chain restaurant. Initially, there was an investigation by federal health investigators of an E.coli illness that was expanded to nine states, with 47 of the 52 people sick reported that they eat at Chipotle. On Monday there were reports of 80 Boston College students who got sick from eating at a local Chipotle. Rumors are circulating that this can be another E. coli incident, although the company believes this is an isolated incident and that norovirus may be the culprit.
Chipotle spokesman Chris Arnold said this about the most recent incident,
“The safety and well being of our customers is always our highest priority, so our restaurant at Cleveland Circle in Boston is temporarily closed while we work with local health officials to investigate a number of illnesses among Boston College students,” Arnold said in a statement. “We do not have any evidence to suggest that this incident is related the previous E. coli incident.” USA TODAY.
It will take another two days to get the test results to confirm whether this was E. coli or norovirus. Any further links of E. coli breakouts to Chipotle can have an enormous impact on future sales for the company. For example, Taco Bell had an E. coli breakout in 2006 which directly led to 5 consecutive negative quarters of same-store sales.
CMG Technical Analysis
CMG gapped down in price yesterday to $531.74, down from the prior day’s close of $551.75, which is a 4% decrease on the unfavorable news. Taking a look at the daily chart, we can see that CMG has had a sharp decline regarding all this negative news. CMG was trading at $611.51 back on November 19th, making that a 13% drop in price in the last 3 weeks of trading. Taking a further look back at the daily chart, we can see that CMG has been on a decline dating back to October 13th when it traded at $750.42. This recent downturn can be primarily contributed to the news of the E.Coli breakouts, and disappointing Q3 earnings numbers. The volatility in CMG right now is extreme with many investors selling shares on the negative news. When the negative news dies down with this extreme sell off it may in the future present an opportunity to buy. As CMG is a fundamentally strong company that is still expanding and is highly profitable. Each Chipotle Restaurant on average brings in $250,000 in profits every year. Right now I would be in a holding pattern with the stock. I want to see the extent of the E.coli breakout news and how the company handles it.
Company Profile
Chipotle Mexican Grill, Inc. (Chipotle), incorporated on January 30, 1998, develops and operates Chipotle Mexican Grill restaurants. The Chipotle Mexican Grill restaurants serve a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads. As of December 31, 2014, the Company operated 1,755 Chipotle restaurants throughout the United States, as well as seven in Canada, six in England, three in France, and one in Germany. The Company’s restaurants also include nine ShopHouse Southeast Asian Kitchen restaurants, serving Asian-inspired cuisine. As of December 31, 2014, the Company also owned and operated two Pizzeria Locale restaurants, a fast casual pizza concept, resulting in a total of 1,783 restaurants. The Company sells gift cards which do not have an expiration date. The Company categorizes its restaurants as either end-caps (at the end of a line of retail outlets), in-lines (in a line of retail outlets), free-standing or other. Of its restaurants in operation as of December 31, 2014, it had 1,081 end-cap locations, 283 in-line locations, 315 free-standing units, and 104 other. The average restaurant size is about 2,550 square feet and seats approximately 58 people. The Company’s restaurants also feature outdoor patio space. The Company’s restaurants accept orders by fax, online or through an iPhone or Android ordering application. The Company also provides a variety of extras, such as guacamole, salsas and tortilla chips seasoned with fresh lime juice and kosher salt. In addition to sodas, fruit drinks and organic milk, the Company’s restaurants also offer a selection of beer and margaritas. The Company uses ingredients, which include chicken, and steak that is marinated and grilled in its restaurants, carnitas (seasoned and braised pork), barbacoa (spicy shredded beef) and vegetarian pinto and black beans. The Company adds its rice, which is tossed with lime juice and freshly chopped cilantro, as well as freshly shredded cheese, sour cream, lettuce, peppers and onions, depending on each customer’s request. It also uses various herbs, spices and seasonings to prepare its meats and vegetables. The Company’s restaurants serve only meats that were raised without the use of non-therapeutic antibiotics or added hormones, which are branded as Responsibly Raised.” Reuters
