Join        Login             Stock Quote

Chipotle Mexican Grill, Inc. (CMG) Beefing Up Before Earnings

 December 19, 2012 09:28 AM

(By Rich Bieglmeier) After reviewing the menu of sectors and their performance, Wall Street appears to ordering restaurant stocks in heaping portions. As iStock paraded through the charts of restaurants and bars stocks, we noticed many in the group moving higher. Clearly, institutions are moving money into the sector.

Chipotle Mexican Grill, Inc. (CMG) could be a beneficiary of the street's interest. The Mexican-Food chain's price got hammered in mid-October following an earnings report that gave traders profit poisoning. After burping up poor sour earnings, CMG shares dropped from $285.93 to 243.00, close-to-close.

[Related -Chipotle Mexican Grill, Inc. (CMG) Extends Gain In Strong Uptrend]

Investors gobbled up the discounted restaurant stock scraps like the family dog since falling off the table, and closed the eps-caused gap down. Now we see a couple of encouraging patterns emerging on Chipotle's stock chart.

The stock price may have traced out a rounding bottom, or even a cup-and-handle, either way, they are both bullish. CMG appears headed for $300. If the price can bypass 3 bills, then the next layer of resistance can be found at $320 followed by $340. With 15% of the burrito builder's float (stock available for trading) sold short, iStock believes a push beyond $300 could lead to some short covering.

Chipotle Mexican Grill's next attempt to garner Wall Street's approval will be late in January when fourth quarter earnings are scheduled to be released. Investors will be watching to see if the company's comparable restaurant sales can rebound after falling to 4.8% for the third quarter of 2012, which is much lower than 8.3% for the first nine months of 2012. That's why the stock price got roughed up.

[Related -Chipotle Mexican Grill, Inc. (CMG): This High-Flying Stock Could Tumble 50%]

Analysts believe CMG will earn $2.09 for the quarter, down from $2.18 ninety-day ago. iStock thinks analysts could revise estimates a little lower before the quarterly report card is due. For October and November, Chicken prices were up more than 1% total, beef increased by 6.49%, and pork jumping 13.64%.

For next year, the consensus eps estimate is $10.41 or 17.10% higher than this year's consensus. The fast-casual, fresh Mexican-food restaurant trades with a forward P/E of 28.09, which is rich for our blood.

Overall, we think there is margin risk for Chipotle Mexican Grill, Inc.'s (CMG) upcoming earnings; however, shares could make a nice, short-covering driven pop. Super aggressive investors might consider January $300 call options if the stock price puts $300 in the rearview mirror. Otherwise, we'd wait to see if margins rebound before committing new money to the stock.


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageBogle Says Indexing Destined To Win The Battle Of The Quants

Vanguard founder John Bogle gave a powerful speech last month at the Q Group’s Spring Seminar that lays out read on...

article imageVMAX and VMIN Poised to Be Most Important VIX ETP Launch in Years

REX Shares is launching two new VIX exchange-traded products on Tuesday in what is likely to be the most read on...

article imageThe April 29 Gold Triangle Breakout Update

If you’re just watching stocks, you may be missing this powerful Triangle Breakout surge in read on...

article imageSell In May, But It Is A Presidential Election Year

With May just around the corner, articles covering the "Sell in May' phenomenon are not in short supply and read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.