3. Chipotle Mexican Grill, Inc. (NYSE:CMG)
Number of Hedge Fund Holders: 38
YTD Share Price Decline as of July 22: 20.31%
Chipotle Mexican Grill, Inc. (NYSE:CMG) is an American chain of fast casual restaurants in the United States, the United Kingdom, Canada, Germany, and France. The shares declined 20.31% year to date as of July 22. UBS analyst Dennis Geiger reiterated a Buy rating on Chipotle Mexican Grill, Inc. (NYSE:CMG) on July 19 and lowered the firm’s price target on the stock to $1,900 from $2,100 ahead of its Q2 results. As per the analyst, investors expect that the company’s comps are slowing from approximately 11% expected in Q2 to 7.7% consensus for Q3. He added that while sentiment on Chipotle Mexican Grill, Inc. (NYSE:CMG) is skewed negatively in the short-term, the long-term growth potential remains intact.
According to Insider Monkey’s data, 38 hedge funds were bullish on Chipotle Mexican Grill, Inc. (NYSE:CMG) at the end of Q1 2022, down from 47 funds in the earlier quarter. Bill Ackman’s Pershing Square is the biggest shareholder of the company, with 1.11 million shares worth $1.76 billion.
Here is what Ensemble Capital has to say about Chipotle Mexican Grill, Inc. (NYSE:CMG) in its Q1 2022 investor letter:
“Chipotle (6.0% weight in the Fund): In a recent blog post called GREAT COMPANIES ARE FORGED DURING CRISIS we discussed why companies with economic moats, relevant products and services, and those that create stakeholder value are more resilient in the face of crisis than the average company. Less advantaged competitors, in turn, struggle, which creates opportunities for great companies to get even better.
We think Chipotle navigated the COVID environment better than any major quick-serve restaurant and has consequently gone from strength to strength. Indeed, from March 1, 2020 to March 31, 2022, Chipotle shares gained 106% versus the S&P 500 Restaurants Index’s 28% return, including dividends.
To be sure, going into 2020, Chipotle had some recent experience in managing through a crisis. Its self-inflicted foodborne illness crisis that occurred in 2015 and 2016 threatened to permanently impair Chipotle’s brand value and damage customer trust. While the company made some changes at the top, bringing in Brian Niccol as CEO, and reorganized its food preparation processes, it did not abandon its mission of providing customers with freshly-prepared, sustainably-sourced food. Even at the nadir of its crisis, the average revenue of a Chipotle restaurant remained in line with the average fast casual restaurant in the US.
When COVID arrived, Chipotle quickly made changes to its strategy. It had planned on doing a marketing push for its new Queso Blanco cheese dip in March 2020 but pivoted to free delivery to ensure its customers could get Chipotle during quarantine. Because Chipotle restaurants are all company-owned (versus most fast-food chains being franchise models), it was nimble amid panic in the restaurant industry. The company continued to build restaurants (161 new stores in 2020) and seized the opportunity to move into prime locations and add more “Chipotlane” drive-thrus…” (Click here to see the full text)
