by winston » Tue Apr 03, 2018 1:40 pm
not vested
Worst Stocks to Buy: Chipotle (CMG)
There is a case to buy Chipotle Mexican Grill, Inc. (NYSE:CMG) at these levels. The impact of the company’s food safety issues is receding. A new CEO has sparked optimism, as Luke Lango argued last month. The company expects positive same-restaurant sales in 2018, and new stores will add to revenue growth.
But I’m not buying CMG, particularly with a quick and steep rebound after a disappointing Q4 earnings report in February. A new CEO can help, but his impact isn’t going to be seen in Q1.
The entire restaurant industry looks rather weak, particularly for operators like CMG as opposed to franchisors like McDonald’s Corporation (NYSE:MCD) and Yum! Brands, Inc. (NYSE:YUM).
And CMG already is pricing in quite a bit of turnaround. The stock trades at over 50x 2017 EPS and 38x 2018 consensus. Those are huge multiples for a still-struggling company in this kind of market. And after the past few quarters, I certainly wouldn’t enjoy being long CMG ahead of Q1 earnings this month.
Source: Investor Place
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