Greg Guenthner coming to you from Baltimore, MD... Teens don't care about E. Coli… As Fortune explains it, the younger generation remained "a very loyal group of customers" to the burrito bandits at Chipotle even as food poisoning cases raged over the past couple of months. And you know what, these dumb kids are right. They might not be as invincible as they think, but they probably won't get sick eating Chipotle. The Centers for Disease Control and Prevention announced this week that the outbreaks at Chipotle are probably over. They were unable to determine the cause. But since the last reported illness occurred Dec. 1st, it looks like Chipotle's in the clear. The restaurant (and the stock) have obviously suffered since these cases started hitting the wire this past fall. Since their October peak, Chipotle shares dropped nearly 50% by early January. And sales predictions from management have been grim… "The company announced that its previous gloomy estimate wasn't gloomy enough," the Washington Post reported earlier this month. "Chipotle had expected comparable restaurant sales (those at restaurants which have been open for at least 13 months) to fall by as much as 11 percent for the quarter ending Dec. 31. They are now slated to tumble by almost 15 percent. In December alone the metric fell by 30 percent." Chipotle released quarterly earnings last night—and they were just as bad as everyone expected. Revenue was way down. In fact, comps dropped almost 15%. And earnings were down more than 40%. That's Chipotle's worst performance since going public… Management also paints an uncertain picture for 2016. But guess what? Like those silly millennials, I'm not worried about E. Coli, either (not from ignorance -- a bad hot dog once introduced me to three days of unrivaled food poisoning joy). I just don't think that eating at Chipotle is that risky right now. More importantly, I don't think customers have completely abandoned the restaurant. To test this hypothesis I recently conducted some rigorous scientific research at great personal peril. I ate at Chipotle—a lot. I braved harsh winter weather (at least the lines were short) and choked down a variety of Chipotle's main offerings. And I did it all for you! I'll risk life and limb to find great trading opportunities everyone else has written off. Did I get sick? Nope. Not once. Have the lines been shorter than normal. Yes. I'd say until very recently, the crowd at Chipotle has been sparse. But when I decided to play another round of burrito roulette yesterday, I bumped right into a line heading out the door. Check it out: Just look at those daredevils... Agreed, this is purely anecdotal evidence that Chipotle is getting back on its feet. But I can tell you with certainty that plenty of major restaurants and packaged food brands have bounced back from much worse. Back in the early 1990s several kids died after an E. Coli outbreak at Jack in the Box. And even after this tragedy, the burger joint was able to rebrand and survive. Plus, that CDC report giving the all-clear should give folks enough confidence to head on back. To me, Chipotle's swoon is a great buying opportunity. And right now looks like a great time to grab a speculative position for a Chipotle comeback story. Chipotle shares are going to drop by about 6% when the market opens today as investors digest earnings. The way I see it, that's a buying opportunity. While I don't think Chipotle stock is going to magically rocket back to its all-time highs over the next few weeks, I do think investors will look back at this dip a couple of years from now and wish they'd taken the opportunity to load up on shares. I'd even stake my health on it. Wait… I already did. Sincerely, Greg Guenthner [Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner] |
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