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Category: Stock Market and Chipotle
Date: 23 July 2020 Stock Price of Chipotle : $1185.27 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of Chipotle, the mexican grill food franchise group with over 2500 restaurants across the globe. Food and takeaway companies have taken a significant hit due to Covid-19 lockdowns. The group reported a 216% increase in digital sales and it made up 61% of their sales for the quarter.
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I want to thank all of our employees for delivering excellent guest experiences, supporting our restaurants, and supporting each other during these challenging times -Brian Niccol, Chairman and CEO, Chipotle."
About Chipotle
Chipotle Mexican Grill, Inc. (NYSE: CMG) is cultivating a better world by serving responsibly sourced, classically-cooked, real food with wholesome ingredients without artificial colors, flavors or preservatives. Chipotle had approximately 2,500 restaurants as of June 30, 2019, in the United States, Canada, the United Kingdom, France and Germany and is the only restaurant company of its size that owns and operates all its restaurants. With more than 80,000 employees passionate about providing a great guest experience, Chipotle is a longtime leader and innovator in the food industry. Chipotle is committed to making its food more accessible to everyone while continuing to be a brand with a demonstrated purpose as it leads the way in digital, technology and sustainable business practices. Steve Ells, founder and executive chairman, first opened Chipotle with a single restaurant in Denver, Colorado in 1993.
Overview of Chipotle's 2nd quarter 2020 earnings report
The data below refers to the numbers of the latest quarter (unless specified otherwise)
- Revenue: $1.364 billion (down from $1.434 billion for the same quarter of the previous year)
- Revenue decreased by -4.9% over the last 12 months
- Total operating expenses: $1.369 billion (up from $1.314 billion for the same quarter of the previous year)
- Total operating expenses increased by 4.2 % over the last 12 months
- Net income: $8.17 million (down from $91.028 million for the same quarter of the previous year)
- Diluted earnings per share: $0.29 (down from $3.22 for the same quarter of the previous year)
- Weighted average shares outstanding-diluted: 28.333 million (up from 28.300 million for the same quarter of the previous year)
- Cash and equivalents: $605.622 million
- Cash and cash equivalents per share: $21.38
- Cash and cash equivalents makes up 11.2% of the Chipotle's total assets
- Cash and cash equivalents makes up 1.8% of Chipotle's current market capital
- Cash and cash equivalents per share: $21.38
- Accounts and notes receivable: $68.066 million
- Accounts and notes receivable makes up 1.3% of the group's total assets
- Stockholders equity in Chipotle: $1.704 billion
- Stockholders equity per share in Chipotle: $60.14
- Chipotle is trading at 19.7 times its stockholders equity per share, which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
- For perspective the S&P 500 is trading at a price to book value of 3.71. Read more about the S&P500 here
- Cash generated from operations for first 2 quarters of 2020: $304.933 million
- Cash generated from operations per share for first 2 quarters of 2020: $10.76
Chipotle's management commentary on their 2nd quarter 2020 earnings
NEWPORT BEACH, Calf., July 22, 2020 /PRNEWSWIRE/ -- Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its second quarter ended June 30, 2020.
Second quarter highlights, which incorporate the impact of COVID-19, year over year:
"I want to thank all of our employees for delivering excellent guest experiences, supporting our restaurants, and supporting each other during these challenging times," said Brian Niccol, Chairman and CEO, Chipotle. "Our investment in digital over the past few years has provided our customers with convenient access to Chipotle how and where they want it. We'll continue to invest in elevating the digital experience, including opening more Chipotlanes, while innovating with new culinary offerings such as cauliflower rice, organic beverages and quesadillas. I'm confident we will finish 2020 with good momentum and be well positioned for the long run."
Second quarter highlights, which incorporate the impact of COVID-19, year over year:
- Revenue decreased 4.8% to $1.4 billion
- Comparable restaurant sales declined 9.8%
- Digital sales grew 216.3% and accounted for 60.7% of sales for the quarter
- Restaurant level operating margin was 12.2%, a decrease of 8.7%
- Diluted earnings per share was $0.29, net of a $0.11 after-tax impact from expenses related to restaurant asset impairment and closure costs, as well as corporate restructuring, a 91.0% decrease from $3.22. Adjusted diluted earnings per share excluding these charges was $0.40, a 90.0% decrease from $3.99.1
- Opened 37 new restaurants including three relocations and closed three restaurants during the quarter; and about 30 restaurants remain temporarily closed because of COVID-19, mainly inside malls and shopping centers
"I want to thank all of our employees for delivering excellent guest experiences, supporting our restaurants, and supporting each other during these challenging times," said Brian Niccol, Chairman and CEO, Chipotle. "Our investment in digital over the past few years has provided our customers with convenient access to Chipotle how and where they want it. We'll continue to invest in elevating the digital experience, including opening more Chipotlanes, while innovating with new culinary offerings such as cauliflower rice, organic beverages and quesadillas. I'm confident we will finish 2020 with good momentum and be well positioned for the long run."
COVID-19 and Liquidity Update:
Chipotle remains steadfast in our commitment to the health and well-being of our guests and employees while providing our safe, delicious, high-quality food made from real ingredients. Our top priorities for the rest of the year include safely running our restaurants and reopening dining rooms, using best practices to support alternate restaurant support center working arrangements, ensuring supply chain consistency, and strengthening our digital ecosystem. Within our restaurants, we have taken a number of steps to enhance our robust food safety protocols including the creation of the steward role which is focused on sanitization in high-touch and high-traffic areas, providing masks for all employees, and having a tamper evident packaging seal for all digital orders.
As of June 30, 2020, Chipotle continues to maintain a strong financial position with $934.6 million in cash, short-term investments and restricted cash, and no debt, along with a $600 million untapped credit facility with which to continue to navigate this crisis. This financial position improved sequentially from $909.2 million in cash, short-term investments and restricted cash, as of March 31, 2020. Furthermore, assuming the comparable restaurant sales improvement we are seeing continues, that gives us greater confidence in our potential to generate positive cash flow for the rest of this year, which will help support on-going strategic investments. That being said, our team remains focused on reducing non-essential controllable costs and judiciously spending on return generating projects to preserve liquidity.
Outlook
Given on-going uncertainty surrounding the future impact of COVID-19 on the broader US economy and any specific impact to our company, we are not providing fiscal 2020 guidance related to comparable restaurant sales growth, new restaurant openings, and effective full year tax rate.
Chipotle remains steadfast in our commitment to the health and well-being of our guests and employees while providing our safe, delicious, high-quality food made from real ingredients. Our top priorities for the rest of the year include safely running our restaurants and reopening dining rooms, using best practices to support alternate restaurant support center working arrangements, ensuring supply chain consistency, and strengthening our digital ecosystem. Within our restaurants, we have taken a number of steps to enhance our robust food safety protocols including the creation of the steward role which is focused on sanitization in high-touch and high-traffic areas, providing masks for all employees, and having a tamper evident packaging seal for all digital orders.
As of June 30, 2020, Chipotle continues to maintain a strong financial position with $934.6 million in cash, short-term investments and restricted cash, and no debt, along with a $600 million untapped credit facility with which to continue to navigate this crisis. This financial position improved sequentially from $909.2 million in cash, short-term investments and restricted cash, as of March 31, 2020. Furthermore, assuming the comparable restaurant sales improvement we are seeing continues, that gives us greater confidence in our potential to generate positive cash flow for the rest of this year, which will help support on-going strategic investments. That being said, our team remains focused on reducing non-essential controllable costs and judiciously spending on return generating projects to preserve liquidity.
Outlook
Given on-going uncertainty surrounding the future impact of COVID-19 on the broader US economy and any specific impact to our company, we are not providing fiscal 2020 guidance related to comparable restaurant sales growth, new restaurant openings, and effective full year tax rate.
Chipotle (NYSE: CMG) stock price history
The image below, obtained from Google, shows the stock price history of Chipotle Mexican Grill (NYSE: CMG) over the last 5 years. And it's been a very good time for Chipotle. 5 years ago the stock of Chipotle was trading at $728 a stock and its currently trading at $1185.27. That's a return of 62.8% provided to Chipotle the over the last 5 years
The stock of Chipotle is trading at a lot closer to its 52 week high of $1187 than it is to its 52 week low of $415 which to us is a clear indication that the short term sentiment and momentum of Chipotle's stock is very positive at this point in time.
The stock of Chipotle is trading at a lot closer to its 52 week high of $1187 than it is to its 52 week low of $415 which to us is a clear indication that the short term sentiment and momentum of Chipotle's stock is very positive at this point in time.
Chipotle Mexican Grill (CMG) stock vs Mcdonald's (MCD) stock over the last 5 years
The image below shows the stock price performance of Chipotle Mexican Grill (MCG) and Mcdonalds (MCD) over the last 5 years. While both are active in the fast food and casual dining industry they do cater for totally different cuisine types. Over the 5 year period they provided the following returns to investors.
- Mcdonalds (MCD): 97.12%
- Chipotle (CMG): 58.90%
Recent coverage of Chipotle (CMG)
The extract regarding Chipotle below is as obtained from MarketWatch.com
Chipotle Mexican Grill Inc. CMG, +1.90% shares declined in the extended session Wednesday even after the Mexican food chain's quarterly results topped Wall Street estimates. Chipotle shares declined 1.3% after hours, following a 1.9% rise in the regular session to close at $1,185.27. The company reported second-quarter net income of $8.2 million, or 29 cents a share, compared with $91 million, or $3.22 a share, in the year-ago period. Adjusted earnings were 40 cents a share, compared with $3.99 a share in the year-ago period. Revenue declined to $1.36 billion from $1.43 billion in the year-ago quarter. Analysts surveyed by FactSet had forecast earnings of 35 cents a share on revenue of $1.33 billion. Same-store sales for the quarter declined 9.8%, while Wall Street had been expecting a decline of 11.5%. Chipotle said it was not providing an outlook for the year given the economic uncertainties of the COVID-19 pandemic. Chipotle shares are up nearly 42% on the year, while the S&P 500 index SPX, +0.57% is up less than 2%
Read the full article here
Chipotle Mexican Grill Inc. CMG, +1.90% shares declined in the extended session Wednesday even after the Mexican food chain's quarterly results topped Wall Street estimates. Chipotle shares declined 1.3% after hours, following a 1.9% rise in the regular session to close at $1,185.27. The company reported second-quarter net income of $8.2 million, or 29 cents a share, compared with $91 million, or $3.22 a share, in the year-ago period. Adjusted earnings were 40 cents a share, compared with $3.99 a share in the year-ago period. Revenue declined to $1.36 billion from $1.43 billion in the year-ago quarter. Analysts surveyed by FactSet had forecast earnings of 35 cents a share on revenue of $1.33 billion. Same-store sales for the quarter declined 9.8%, while Wall Street had been expecting a decline of 11.5%. Chipotle said it was not providing an outlook for the year given the economic uncertainties of the COVID-19 pandemic. Chipotle shares are up nearly 42% on the year, while the S&P 500 index SPX, +0.57% is up less than 2%
Read the full article here
Chipotle (NYSE: CMG) latest stock valuation
So based on Chipotle's 2nd quarter 2020 earnings report what do value Chipotle Mexican Grill shares at? And is there value in the stock considering the strong run the stock price had over the last two years? Based on the earnings report our valuation model provides a target price (full value price) for Chipotle at $427.80 a stock (up from our 1st quarter 2020 earnings valuation of Chipotle). We therefore believe the stock of Chipotle is overvalued.
We usually recommend that investors look to enter a stock at least 10% below our target price which in this case s $412.80. A good entry point into the stock of Chipotle would therefore be at $371.50 or below. Since the stock of Chipotle is trading at well above our full value price we rate the stock of Chipotle as a sell
We usually recommend that investors look to enter a stock at least 10% below our target price which in this case s $412.80. A good entry point into the stock of Chipotle would therefore be at $371.50 or below. Since the stock of Chipotle is trading at well above our full value price we rate the stock of Chipotle as a sell
Chipotle (MCG) next earnings release
Chipotle is expected to release their 3rd quarter 2020 earnings report towards the end of October 2020