This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Chipotle Is Almost Out of the Woods

To be seen is whether Chipotle truly is a premium brand, or not. A key test for investors, is whether the restaurant chain can raise prices of popular menu items.

Wells Fargo analyst Jeff Farmer had expected Chipotle to announce a price increase in the first quarter, but now expects a 3%-to-5% increase later in 2013.

Such a move could bolster profits but test the loyalty of value oriented consumers. It could also prove or disprove some of the key pieces of David Einhorn's own analysis when shorting Chipotle shares.

Recent concerns such as slowing growth trends, commodity price inflation and valuation, meanwhile, are unlikely to surprise investors given the challenges Chipotle faced at the end of 2012.

Chipotle also has natural earnings and cash flow growth, even if trends have indicated slowing growth in profitability.

For instance, a recent presentation from Chipotle chief financial officer Jack Hartung indicated the company sees a 71.5% return from the $800,000 it costs to open each new restaurant.


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 reaffirmed forecasts for up to 180 store openings in 2013.

Ultimately, as earnings at Chipotle rise and margin pressures alleviate, the company has a path to recapturing 2012 stock price highs. Proving a premium market position by way of price increases and new products remain a key test.

Bottom Line: After first-quarter earnings, Chipotle has less left to prove to skeptical investors.

-- Written by Antoine Gara in New York

Stock quotes in this article: CMG, SBUX, YUM 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,501.65 -12.72 -0.08%
S&P 500 1,875.39 -4.16 -0.22%
NASDAQ 4,126.9670 -34.4910 -0.83%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs