Author Topic: CMG - Chipotle  (Read 71624 times)

JayGatsby

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Re: CMG - Chipotle
« Reply #250 on: July 17, 2017, 09:07:17 AM »
Is anyone thinking about this again at these prices?  I might be harnessing my inner Buffett but you have a good company going through a rough patch.  This company probably has the ability to raise prices over time (they don't claim to be the cheapest) and now have the CEO who founded the company way back when.
I was looking at it a bit yesterday. I own a good amount, but agree it's getting attractive (again). The stores I go to all seem to be doing fairly well just based on looking around, although I don't know how they did two years ago. They should be able to increase prices as things normalize.  The data point I always go back to is in 2015 they did $900M of EBITDA with ~2000 ending stores. By the end of this year they should be just under 2500 stores. So with 25% more stores, getting back to a similar EBITDA level doesn't seem like a huge stretch. Last quarter they did $116M, so definitely some work left to get back to that level though. If they got back to $900M they're probably slightly undervalued assuming a run-rate, so you also have to believe they can keep opening 200 new stores a year with good margins. The industry has definitely gotten more crowded with some good new local options in places I've been recently.

I was just reading a book on Wayne Huizenga and Blockbuster. When they invested in Blockbuster it was a bit like early Chipotle... new concept, great unit economics, low barriers to entry, everybody knew it was going to be a big thing. He knew he had to rush it to market and at times was opening 400+ stores a year and buying competitors. Chipotle's been opening 200-250 for as long as I can remember... healthy number but I wish they'd gone faster. Obviously that doesn't impact the current valuation, I just thought it was an interesting comparison.


TorontoRaptorsFan

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Re: CMG - Chipotle
« Reply #251 on: July 17, 2017, 09:20:58 AM »
The Chipotles I go to constantly have lineups at lunch time through the door.
I've always said I prefer to purchase shares below $400 so we're at that price point now.
The fact that Ackman has promised not to meddle in affairs for a couple of years was a good sign that he was comfortable with the direction the company was heading into.
There's definitely a lot more competition. I would have preferred if they focused more on Chipotle and Pizzeria Locale. I feel they got sidetracked with Tasty Made. There's still only one location. If they feel a need to delve into the burger business they should purchase a competitor whose values align with their own (Burger Lounge would be a good choice).
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educatedidiot

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Re: CMG - Chipotle
« Reply #252 on: July 17, 2017, 10:53:17 AM »
The data point I always go back to is in 2015 they did $900M of EBITDA with ~2000 ending stores. By the end of this year they should be just under 2500 stores. So with 25% more stores, getting back to a similar EBITDA level doesn't seem like a huge stretch.

I'm not sure if they'll ever get back to those peak 2014-2015 productivity levels of $450k in EBITDA per store, but even if they only got back to the $350k per store they did in 2011 that's still ~$875 million in EBITDA.  You can see the year by year store economics here: http://www.rocketfinancial.com/Financials.aspx?fID=2408&p=2&pw=79422&rID=10

Spekulatius

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Re: CMG - Chipotle
« Reply #253 on: July 18, 2017, 09:19:04 AM »
CMG'S niche of " healthy" fast mexican food has gotten more crowded. There are at least 2 competing chains with similar fare in my area and at least one of them has a superior offering to Chipotle.
To be a realist, one has to believe in miracles.

DTEJD1997

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Re: CMG - Chipotle
« Reply #254 on: July 18, 2017, 09:25:32 AM »
Hey all:

There are reports now of another mass food poisoning incident at a Chipolte in VA.  Stock is down 6%+.

It just hit me that MAYBE this needs to trade at a DISCOUNT to the market and not a premium.

There is a TON of competition now, some of it is pretty good.

How many times have they had problems with food safety?   Is this the 4th time?  I seriously don't know, but it is MULTIPLE times.



fareastwarriors

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Re: CMG - Chipotle
« Reply #255 on: July 18, 2017, 09:28:41 AM »

AzCactus

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Re: CMG - Chipotle
« Reply #256 on: July 18, 2017, 09:29:25 AM »
CMG'S niche of " healthy" fast mexican food has gotten more crowded. There are at least 2 competing chains with similar fare in my area and at least one of them has a superior offering to Chipotle.

I'm not directly making a comparison here but I think there is room for more than one company to be successful.  Pizza-Dominoes, Pizza Hut etc. Burgers-McDonalds, Burger King etc.  I think what you mention may slow down their growth rate but it doesn't altogether mean investing is a bad idea. 

aceskc

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Re: CMG - Chipotle
« Reply #257 on: July 18, 2017, 11:32:14 AM »
Either this article was previously prepared or business insider has the fastest researech/publication speed amongst its peers...

http://www.businessinsider.com/where-to-eat-instead-of-chipotle-2017-7

AzCactus

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Re: CMG - Chipotle
« Reply #258 on: July 18, 2017, 11:46:36 AM »
Competition definitely exists but that doesn't mean there isn't room for two companies in the same marketplace. 

TwoCitiesCapital

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Re: CMG - Chipotle
« Reply #259 on: July 18, 2017, 12:42:21 PM »
Hey all:

There are reports now of another mass food poisoning incident at a Chipolte in VA.  Stock is down 6%+.

It just hit me that MAYBE this needs to trade at a DISCOUNT to the market and not a premium.

There is a TON of competition now, some of it is pretty good.

How many times have they had problems with food safety?   Is this the 4th time?  I seriously don't know, but it is MULTIPLE times.

20M people a year get Norovirus and clearly not all of them are getting it from Chipotle. Where are the news stories on all of the other chains where this happens?

The market is just overly sensitive to negative news on Chipotle given that it's pristine image was shattered by the initial scare.