Chipotle’s Losses Have Tracked The S&P 500 So Far, But Can It Outperform Post Coronavirus Scare?

Notably, CMG recovered strongly post the 2008 crisis, to levels of about $88 in early 2010 – rising more than 61% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period. Given how closely the company’s stock has tracked the S&P 500 this time around too, it will very likely outperform the broader market index over the coming months.

On Monday, 9th March, the stock market entered into a phase of extreme volatility, with two significant sell-offs on Monday and Thursday being separated by days of partial recoveries. Overall, there have been two distinct trends driving the recent sell-off. Firstly, the increasing number of Coronavirus cases outside China is causing mounting concerns of a global economic slowdown. Secondly, crude oil prices plummeted by more than 20% after Saudi Arabia increased production.

CMG stock has suffered as states and countries are on lockdown. People are not meeting friends and colleagues or going out with family for lunch or dinner. Many restaurants and food outlets have temporarily pulled down their shutters, and the ones still open are operating in take-out-only mode. Besides lower demand, supply chains across the world have also taken a hit – leading to lower sales. We believe Chipotle’s Q1 and Q2 results will confirm this reality with a drop in their revenue – more than 95% of which comes from North America.

Chipotle’s stock can potentially gain more than 30% (the proportionate change as it fell half as much as in the previous crisis and could gain half as much), but the actual gain and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread. If signs of coronavirus containment aren’t clear by the last week of April when Q1 earnings are expected, it’s likely Chipotle’s stock (along with the broader market) is going to drop further when results confirm palpable reality.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture. It complements our analyses of the coronavirus outbreak’s impact on a diverse set of Chipotle’s multinational peers, including McDonald’s, and Starbucks. The complete set of coronavirus impact and timing analyses is available here.