Chipotle 2012 Stock Declines: Why Some Experts Say You Shouldn't Worry

July 26, 2012 9:54 PM EDT | By Anthony Smith
Chipotle
Why it doesn't matter that Chipotle's stocks took a dramatic dip. (Photo: Creative Commons)

When it comes to publicly trading food on the stock market, I can't think of a company more discussed, to its benefit and detriment, than Chipotle. Since opening last Friday at a whopping $403.66 per share of stock (to put that into context, we can't remember the last time McDonald's has broken $100), the company has plummeted by a margin of 21.51% by yesterday's closing bell. That's right, folks: Chipotle closed at $316.98, the worst single day performance in the stock's history since its terribly meek IPO six years ago.

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An expert at SeekingAlpha has categorized the response to this as a classic market overreaction-- but then, they'd also call the hype surrounding the restaurant's stock the exact same thing. While they make a point of putting their love for the company's core fundamentals for a healthy, superior product at fast food price and convenience, they point out that the company's stock is "grossly overvalued," but do point to a great potential for CMG's future gross.

But a negative overreaction, according to this expert, is exactly the free market sin of which Chipotle's executives are guilty. According to their reports from a conference call, executives at the company cited the caustic economic climate in lockstep with a decrease in consumer confidence as the key reason for all of their metrics falling well shy of expectations.

However, the company is missing a key issue here: the massive drought in the United States that has ravaged our crops. If you take a look at the stock drop in context, many publicly trading companies including Whole Foods Market, Starbucks, and Panera Bread are all down by significant margins.

We're holding tight to see what happens next.



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