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David Einhorn's Feast or Famine Chipotle Short

Updated from 12:47 p.m. ET to afternoon market action and additional data throughout.

NEW YORK (TheStreet) -- Shares of Chipotle Mexican Grill (CMG) have quietly regained the ground lost since David Einhorn of Greenlight Capital detailed a bet against the company, and upcoming earnings will provide insight into how the Denver-based restaurant chain's stock will perform in 2013.

Chipotle faces a high bar on year-over-year earnings and same-store comparisons and pressure on margins from commodity price inflation, but if the company can prove to investors that it still has high growth prospects, the short trades could eventually unravel.

The company's shares are up over 15% this year, outperforming the S&P 500 Index. Chipotle recently breached a $319.87 share price prior to Einhorn's presentation, indicating the stock may have already bottomed amid already apparent earnings headwinds and negative publicity.

Still, with the stock trading at forward multiples of about 30 times earnings and a short interest of roughly 13%, Chipotle investors remain vulnerable to disappointments such as the company's third quarter earnings, which sent the company tumbling to multi-year lows in October.

After posting 50%-plus stock gains in 2009, 2010 and 2011, Chipotle's shares fell nearly 20% in 2012, as some like David Einhorn bet the company's best days of growth, earnings and brand were behind it.

Einhorn believes Chipotle is a run-on-the-mill fast food chain in the eyes of consumers, meaning margins and growth at the company will fall amid competition from price competitors such as Taco Bell, owned by Yum! Brands (YUM) and Qdoba Mexican Grill.

"In presenting our short thesis on [Chipotle], we noted that the stock trades at a premium multiple but faces significant headwinds including rising food costs, higher healthcare costs related to Obamacare, and competition from a resurgent Taco Bell," Einhorn wrote in a 2012 investor letter, which cited a Greenlight Capital survey indicating Taco Bell's Cantina menu could draw Chipotle customers.

Chipotle, on the other hand, continues to point to consistent earnings growth and rising store profitability as clear evidence the company has a premium product.

For instance, Einhorn has so far failed to mention that Chipotle posted record operating and EBITDA margins in 2012, according to data compiled by Bloomberg, as the company saw the benefit of an over 23% return on invested capital, another new record.

It's also hard to bet against a company that sees a 71.5% return from the $800,000 it costs to open a new restaurant, according to a recent investor presentation from Chipotle.

Chipotle shares gained over 3% in Wednesday trading to $343.55, cutting at the company's slight underperformance to the S&P 500 since Einhorn's Oct. 2 presentation.

The mathematics behind Chipotle's store and earnings expansion since 2009 indicate the company may have much further to run in growing sales and earnings without diluting profit margins.

Since 2009, Chipotle has grown its store count from just under 1,000 restaurants to 1,400 at the end of 2012, however, the company has seen an 80% rise in revenue and an over 100% increase in net income over that period.

The company opened 183 new restaurants in 2012 and it expects up to 180 store openings in 2013. Forecasts from Chipotle are for flat to single-digit same store sales growth in 2013.

Chipotle's first quarter earnings report, scheduled for April 18, will likely foretell whether Einhorn can continue to press the company's underperformance or if he will need to re-evaluate the logic of his bet.

Analysts forecast Chipotle will only grow EPS about 7% this quarter, indicating a sharp drop in profit growth, as revenue continues to hit new highs.

First-quarter consensus estimates stand at revenue of $724 million and a profit of $67 million, or $2.13 a share, according to Bloomberg data.

The quarter will also be about how 2013 guidance impacts investor concerns such as same store sales comparables, and commodity price inflation.

Chipotle has yet to fully detail how it may use a marketplace premium to raise prices and offset some earnings drains like high food costs, which represent about 30% of the company's expense.

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