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Have We Had Enough Chipotle?

Posted by: Ben Steverman on February 15, 2008

On Friday, Chipotle Mexican Grill (CMG) reported earnings. Though they barely missed analysts’ estimates, investors were clearly displeased, especially at first.

At one point on Feb. 15, Chipotle’s stock had plunged 12%. It recovered to end the day with a 3% loss.
Chipotle is a great company with tasty products (one of which – crispy vegetarian tacos — I consumed for lunch today) and strong growth prospects. But the stock has also been relentlessly hyped over the past year.

That worried me. So last November, just in time for Thanksgiving Day, I chose Chipotle as one of the stock market’s “overstuffed turkeys.” I wrote in part:

“For all the optimism about Chipotle, its stock price could lose some spice eventually. For one thing, rapid growth often creates unexpected challenges. Also, it may be tough to keep costs in check, especially as food prices rise. … Finally, there’s the question: How many burritos can Americans eat? Eventually the chain’s growth will reach some natural limits.”

But it’s too early for me to gloat.

How long could Chipotle’s fiesta go on? Lots of other overhyped stocks have laughed at the skeptics for months and years as their share price kept moving ever higher. The strong rebound for shares in afternoon trading suggests there are a lot of Chipotle fans who saw weak results as just another chance to take a second helping of the chain’s shares.

Reader Comments

G. Harrison

March 7, 2008 10:21 AM

This story is not surprising to me. Like everything else (tv shows, movies, books, company philosophies and even styles), one person has a good idea and everyone tries to jump on the same idea bandwagon. Everyone is a copycat. Why? Because they are all afraid of the risk involved in creating something new. All you have to do is stop on any exit ramp on any major highway, look around and you can see the same McDonalds, Mobile or Exxon station, Taco Bell or KFC franchise to realize that you could be anywhere, USA. No originality because of fear of failure. Why come up with something new if something old works? When landlords lease to businesses, why would they give mom and pop a chance when TGIF or Ruby Tuesday is a known commodity? Why come up with a new/innovative tv show when you can just copy a reality show that worked? I was really appalled when I saw an a classified ad for a Baskin Robbins that was recruiting an "ice cream scooper" and the ad stated, "college degree preferred". Which company decided that having a college degree makes a better employee? Sure, there are people who play it safe (college degreed, copycats), but if you are really looking for someone who "thinks outside the box", do you want a person who always "plays it safe"? This is what we are dealing with now - an entire country of large corporations who all play it safe - because everyone else does it. Now, I laugh when companies recruit requesting that managers have Masters Degrees and knowledge of "Six Sigma". These are people who have to "study" how to solve problems - in a method that has been provided to them. There seem to be few entrepreneurs left because no one is really encouraged to "think outside the box". Personally, I develop about 10 original, creative ideas per week relative to start-up businesses, new ideas and problem solving. I write up the plans and they go nowhere because even venture capitalists really want something that has been done before. Don't even get me started with politicians. A real politician should come up with original and creative ideas - not just say they are going to "change" the way we do business. HA! How about some new ideas? I have many, but unfortunately, I'm only a small voice in a country of copycats.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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