Thoughts on Chipotle

The original fast casual chain, Chipotle virtually invented a whole new category of food delivery that a lot of others have since copied. Originality is still rewarded well. CMG trades at a 30x forward multiple, which should be lower. After a solid decade of growth, the company’s food crisis will force them to refocus on quality over quantity in the short term.

The stock is still looks pretty expensive when compared to others in the space, but with just 2,200 stores the future could still see that count more than doubling. McDonald’s has more than 34,000. CMG looks cheap from a relative standpoint given the stock was $700 a share not too long ago. We just think it could go lower, dipping below $300. Don’t chase it down here. Growth and profitability still matter and there’s a market correction still on the horizon.

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