Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money

79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

FREE EBOOK

How to Day Trade Stocks & Indices

  • Place your first trade
  • Identify 9 chart patterns
  • Pro strategies step-by-step

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy. This form is protected by reCaptcha

Earnings

Could an earnings surprise spice up Chipotle’s share price?

Chipotle’s [CMG] share price has been a hot stock in 2020. Since March, the stock has been on fire — climbing 196.4% to an all-time high of $1,379.03 on 2 September. After the restaurant chain releases its third quarter earnings report on 21 October, what can investors expect of Chipotle’s share price?

As the coronavirus pandemic started to disrupt the markets, Chipotle’s share price hit an intraday low of $415 before closing at $465.21 on 18 March, which set a 52-week low for the stock.

It didn’t take long for Chipotle’s share price to recover, however. By 11 May, it had regained its lost value, and narrowly surpassed a record close it set in February by $0.09.

Since then, Chipotle’s share price has continued to rally. The stock reached a record intraday high of $1,384.46 before closing at $1,379.03 on 2 September.

As of 16 October, Chipotle’s share price is up 60% at $1,339.68.

 

Will more Chipotlanes boost revenues? 

When Chipotle announced its second quarter earnings on 22 July, it reported earnings of $0.40 per share, missing the Zacks consensus estimate of $0.51 per share. This marked a decline of 90% from the $3.99 per share it made in the same quarter a year prior.

It’s worth noting, though, that it was the first of the last four quarters where Chipotle didn’t beat earnings estimates.

On the other hand, Chipotle posted revenues of $1.4bn for the quarter ended June. Although this exceeded the Zacks consensus estimate (for the fourth consecutive quarter) by 2.35%, it marked a 4.8% drop from the year ago quarter when the company posted revenues of $1.43bn. Chipotle’s share price dipped 5.42% following the lacklustre earnings.

Brian Niccol, Chipotle chairman and CEO, pointed to success in developing the company’s digital presence in recent years, in which the company plans to continue to invest.

Looking ahead to the next earnings report, Zacks is expecting Chipotle to announce earnings of $3.41 per share, which would mark a decline of 10.73% year-over-year.

On the other hand, the Zacks consensus estimate is calling for quarterly revenue of $1.59bn, which would represent an increase of 13.11% from the same time last year.

 

Is Chipotle’s share price too expensive?

“While Chipotle may seem ‘expensive’ on a near-term multiple of earnings, it has plenty of opportunities to grow into those expectations. In the US alone, Chipotle thinks it can more than double its current store count to over 6,000 locations.” Ensemble Capital said in its third quarter investor letter released on 30 September.

The firm also points to longer-term opportunities in regions such as Europe and Asia, in which the company has yet to make a major push.

Meanwhile, Jon Tower, an analyst at Wells Fargo, is one of three analysts to have raised price targets in the run up to Chipotle’s earnings announcment, according to the Fly. He raised Chipotle’s share price target to $1,460 from $1,282, while keeping an Overweight rating.

Among 34 analysts polled by CNN Money, the consensus is to hold the stock. This rating is held by a majority of 17 analysts, with 14 suggesting to buy the stock, two giving it an Outperform rating and one other giving it an Underperform.

The median 12-month price target among 27 analysts polled by CNN Money is $1,325, with a high estimate of $1,600 and a low of $890. The median price represents a 1.1% increase from Chipotle’s share price as of 16 October’s close.

 

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Continue reading for FREE

Join the 40,000+ subscribers getting market-moving news every week.

Written by

Free ebook

Tricks of the trade: 7 interviews with the world’s top traders

Get it now

Related articles