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Bear of the Day: Chipotle (CMG)

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Today’s Bear of the Day has been a punching bag of a stock and the butt of a lot of jokes. After a huge scandal involving E Coli in their food, this company has struggled to regain the momentum it once had. I’m sure by now you already know what I’m talking about. That’s right, one of my favorite places for a quick bite and the Godfather of Fast Casual, Chipotle.

Chipotle Mexican Grill (CMG - Free Report) operates Chipotle Mexican Grill restaurants. The Company's Chipotle Mexican Grill restaurants serve a menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads. As of December 31, 2016, the Company operated 2,198 Chipotle restaurants throughout the United States, as well as 29 international Chipotle restaurants, and it also had 23 restaurants in operation in other non-Chipotle concepts.

The stock is a Zacks Rank #5 (Strong Sell) because of several earnings estimate revisions to the downside. Over the last sixty days, twelve analysts have dropped their estimates for the current quarter while fourteen have cut their numbers for next year. The bearish sentiment has dropped the Zacks Consensus Estimate for the current quarter from $2.37 to $1.81 while next year’s number has plummeted from $11.91 to $10.51.

Shares of CMG have come under pressure since getting close to $500 in mid-May. From there, shares have broken down through the 50-day moving average, tumbling under $300 before bouncing to back to the 50-day with the stock near $319.21. At this level, the Commodity Channel Index is overbought at 136, implying that the buying may be coming to an end. The 50-day moving average is now providing upside resistance at $326.18.

For those of you trying to come in and bargain shop for Chipotle here, I’d wait for the CCI to come back down at least to the zero line, if not wait for another more traditional buy to set up. Traditionally, you want to wait for the CCI to get oversold, under -100, then cross over the zero line to give a “Buy” signal.

Investors looking for other stocks in the restaurant industry should check out Zacks Rank #1 (Strong Buy) Famous Dave’s DAVE and Zacks Rank #2 (Buy) stock Del Taco TACO.

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