This is shaping up to be another forgettable year for Chipotle Mexican Grill (NYSE: CMG) shareholders. The out-of-favor burrito roller has seen its stock fall 22% in 2017, and that comes after a 21% plunge the year before. The market's roaring, and Chipotle's crumbling like a burrito wrapped in a Swiss cheese tortilla. The stock has plummeted 61% since peaking three summers ago.
There are a lot of things going wrong at Chipotle these days, but that doesn't mean the shares will keep sliding. Let's go over three reasons to dump Chipotle that just don't pan out.
Image source: Chipotle Mexican Grill.
1. Stomp the comps
The chain is coming off another rough quarter, eventually sending the shares to their lowest levels in five years. Unit-level sales continue to be an issue. Comps have been inching higher in 2016, but we're nowhere near where the stores were in late 2015. Even though comps have climbed 1% in its latest quarter after a 22% plunge a year earlier, that still means Chipotle is just roughly 5% of the way back. Even if we look at the kinder numbers of the first nine months of the year -- where comps rose 8% after declining 19% during the same period a year earlier -- we remain far away from 2015's throughput marks.
We may never again achieve peak Chipotle, and we definitely won't be there anytime soon. The food-borne illness outbreak may have exacerbated the situation, but comps were already decelerating in 2015, before the first of the many brand-tarnishing incidents happened. Moreover, Chipotle was going to fade from its status as a cult darling even if no one got sick, given the competitive climate in fast casual. The silver lining here is that none of this means Chipotle has to be a bad investment at this point.
Tack on the 30% slide the stock experienced in 2015, and we're talking about a deflating investment that has fallen by at least 20% for three consecutive years. It would have to soar 157% to hit the all-time highs it reached during the summer of 2015. But there are also roughly 500 more restaurants now than there were when its stock peaked. Chipotle can still beat the market without getting back its peak mid-2015 performance with all that ground to make up.
2. Queso is a mess-o
There's no denying that Chipotle disappointed a lot of people with its version of queso. The chain blew it, and the highly anticipated rollout toward the end of the third quarter wasn't enough to lift sales to acceptable levels. Comps rose a mere 4% during the final three weeks of the period when queso was made available, and the chain's guidance suggests flat comps during the current quarter.