Chipotle Mexican Grill's "A Series of Unfortunate Events"
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Price Target $275.00
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(SI Newswire) For those of you who have little persons in the home, you may be aware of the children’s book "Lemony Snicket's A Series of Unfortunate Events," in which the villainous Count Olaf attempts to steal the inheritance of three wealth orphans in his charge. When the children discover his true intentions and try to escape, Olaf orchestrates numerous disasters in an attempt to get his hands back on the children and their fortune.
In much the same way, a series of unfortunate events has befallen Chipotle Mexican Grill (NYSE: CMG) that has served to shave over 45% off the company’s value (and consequently its investors’ fortunes) since last August when the stock was flying high trading in the mid $750s. Today, it trades at levels not seen since mid-2013, and we see significant further downside risk. These risks include (1) wage inflation; (2) rising input & advertising costs; (3) consumers’ realization that burritos are not health foods, (4) a tarnished brand image; (5) mediocre reviews for its new foray into burgers (its long-term plan to steal market share from Shake Shack (NYSE: SHAK) and McDonald’s (NYSE: MCD) not doing too well right now; (6) a possible Mexican standoff between activist investors and entrenched management; (7) unwise use of cash; (8) still trading at a premium to competitors such as Panera (NASDAQ: PNRA); (9) overhang from pending criminal and civil investigations; and (10) insiders doing much more selling than buying.
Any one of these factors by themselves would be cause for concern, but taken together, we have serious doubts about Chipotle’s ability to steer this behemoth out of murky waters. As such, we have set a Strong Sell rating with an accompanying $275 price target.
For more on our analysis, please click the link below:
About us: Street Watchdog Research comprises a small group of investors, analysts, & short sellers based in Scottsdale, AZ. Our principals include Maxwell Athanis, Timothy Diggs, Cynthia Wayne, Angelene Dunlap, and Marissa Cabrera.
Disclosure: We are short CMG. We do not have a financial relationship with the company.
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