Why Have We Revised Our Price Estimate For Chipotle Downwards?
Chipotle Mexican Grill’s (CMG) recent earnings failed to impress, despite the company’s many efforts to revive growth. One of the most watched metric for the industry, comparable sales, which was estimated to fall by roughly 19% by analysts, came in much lower at -22%, registering barely any improvement. Further, despite the various marketing and promotional gimmicks it has been offering, Chipotle’s revenues were down 15% on an annual basis in the third quarter. The promotional activities, in turn, resulted in the company’s operating expenses rising by as much as 7% y-o-y, excluding depreciation and impairment charges. Even as a percentage of revenue, operating expenses continued to be higher, likely due to heavy spending on advertising and marketing campaigns that Chipotle has undertaken to restore its brand image. Consequently, the company’s margins suffered a significant decline.
Although Chipotle is contemplating adding more menu items and tying the whole experience together through digital innovation, in order to recover its comps and enhance the guest experience, we think that it may be too early to see a turnaround, as its key statistics remain under pressure. Consequently, we have revised our price estimate of CMG downwards.
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Have more questions about Chipotle Mexican Grill (NYSE: CMG)? See the links below:
- Chipotle’s Q3’16 Performance Fails To Impress; Tough Road Ahead
- Chipotle Mexican Grill Q3 FY’16 Earnings Preview: Comps Will Remain Under Pressure
- Will Chipotle’s Food Safety Initiatives Lead To A Turnaround In Comps?
- Health Revolution: Healthy For Some, Unhealthy For Others
- Will Chipotle’s Latest Marketing Gimmicks Pay-Off?
- What Impact Can The Continued Fall In Spend Per Visit Have On Chipotle’s Stock Price In The Next Year?
- How Has Negative PR Affected Chipotle’s Operating Efficiency?
- What Can Produce Over 10% Upside To Chipotle’s Stock In The Next Year?
- How Is Chipotle Dealing With The Aftermath Of The E.coli Outbreak?
- Down, But Not Out: Chipotle Returns To Profitability In Q2’16, Despite Weakness In Top Line
- Chipotle Mexican Grill Q2 FY’16 Earnings Preview: Recovery In Top-line Likely To Be Weak
- Chipotle Mexican Grill Struggles in Q1 FY’16 As Last Year’s E.coli Controversy Impacts Comparable Sales
- Chipotle Mexican Grill FY 2015 Earnings Review: E.Coli Scandal Hinders Top-line Growth
- What’s Chipotle Mexican Grill’s Fundamental Value Based On Expected 2016 Results?
- What Is Chipotle Mexican Grill’s Revenue and EBITDA Bridge?
- How Has Chipotle Mexican Grill’s Operating Metrics Changed Over 2011-2015?
- Where Will Chipotle Mexican Grill’s Revenue and EBITDA Growth Come From Over The Next Three Years?
- Chipotle Mexican Grill Q1 FY’16 Earnings Preview: E.coli Scandal Might Still Impact Top-line Growth
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