Chipotle earnings are out: One trader’s lingering concern about the soaring stock

Can Wall Street’s urge for food for Chipotle maintain sturdy?

That query was key heading into the fast-casual restaurant operator’s third-quarter earnings report, out Wednesday after the bell. Chipotle’s stock fell 6% after hours in response to the outcomes regardless of a top- and bottom-line beat as supply progress stored a lid on income.

The shares closed greater than 1% larger at $1,366.66 forward of the launch, including to their 62% acquire for the 12 months.

The stock’s motion on Wednesday introduced it inside 1.5% of its all-time excessive from early September.

“The big question is can they sustain this massive growth?” Michael Bapis, managing director of Vios Advisors at Rockefeller Capital Management, informed CNBC’s “Trading Nation” on Wednesday.

Applauding Chipotle’s capability to scale its supply enterprise throughout the coronavirus pandemic, Bapis listed a number of different elements working in the firm’s favor together with its buyer loyalty program.

“They were also able to create a real loyal culture within their employee base,” he stated. “They’ve created a culture there where you can grow as an employee. And finally, they’re able to sustain earnings growth. I think it may be reasonably valued at this point right here in the short term, but long term, there’s a lot of room for them to grow, especially the way they’re scaling.”

Plus, if customers preserve their health-consciousness, Chipotle “fit[s] right into that picture,” Bapis stated.

“As I said, it’s maybe reasonably valued now, but long term, we’re looking for this company to continue to rise and to continue to have tremendous earnings growth over the next 24 months,” he stated. founder Todd Gordon was additionally on the lookout for extra upside.

“It’s kind of reinvented itself after that 2016 E. Coli scandal,” he stated in the identical “Trading Nation” interview.

“The chart is in a powerful uptrend, but if you use a parallel channel of resistance on [a] log scale [chart], it’s not actually yet overbought” and will not be till it breaks above no less than $2,000 a share, Gordon added.

“They did bring in a new CEO, Brian Niccol, in ’18 to recover from that scandal,” he stated. “They’ve refocused their marketing to figure out how to win that customer loyalty back. They’ve been focusing on the digital growth, creating those sticky customers, plus they have a nice partnership with GrubHub which should drive sales.”

While Gordon acknowledged that Chipotle’s margins in Wednesday’s earnings report could possibly be “questionable given the impact of Covid,” they’d even be “transitory,” he stated.

“We continue to be bullish,” he stated.


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