Chipotle (CMG) - Uncertainty Not Worth the Price

Chipotle Mexican Grill (NYSE: CMG) dropped 5.4% in after-hours trading after reporting its earnings. The company beat Wall Street expectations on the bottom line by 22 cents, but reported lower sales than expected and warned about a pork shortage that would affect its sales moving forward. The company also missed expectations for comparable store sales, and comparable sales are expected to moderate in pace significantly in 2015. The stock was valued richly heading into its earnings report. Thus, these new issues, which threaten to continue to drag on operational results this year, should cause investors to reassess and relocate capital. See my report on Chipotle (CMG).

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Chipotle Mexican Grill (NYSE: CMG) Report

Chipotle Mexican Grill (NYSE: CMG) reported an EPS blowout against Wall Street expectations. However, its outlook for 2015 disappointed investors, as the shares traded down 7% after the report. So what are investors to do with CMG shares now? Given the company’s excellent execution and the fact that it is in the right spot of the consumers’ stomach in America, it deserves a favorable perspective. In terms of valuation, I do not see it as an expensive idea against what are apparently conservative estimates. Chipotle still has to prove itself internationally, but markets are available for it similar to the U.S. market. I see risks around Ebola, should the global situation deteriorate, due to the company’s consumer focus and what fear may come. It’s wise to keep the radar attuned here, and for all the perhaps at risk names with consumer exposure and potentially sensitive valuations. I am not concerned, however, about global economic growth for CMG, as its menu price point is not relatively expensive. Also, the consumer trends that serve it in the U.S., regarding the increasingly health conscience society, exist in its next growth markets as well. Thus, aggressive and/or diversified investors, and those portfolios where restaurant exposure is needed, can consider adding Chipotle (NYSE: CMG) shares, especially as we enter December and exit the current dynamic capital flow environment. For more, see my report on CMG at Seeking Alpha.