CMG - Chipotle: Unsustainable Price Hikes

2024-05-31 14:59:45 ET

Summary

• Chipotle's revenue growth relies heavily on increased prices for portions.
• Consumer dissatisfaction with portion sizes and price hikes is growing, leading to potential backlash and a shift to competitors.
• The market may be overvaluing Chipotle's growth potential, and the stock may be poised for a correction.

Investment Thesis

Chipotle Mexican Grill (CMG) has seen impressive growth in recent years, but I think this is short-lived. I not only believe their revenue growth relies heavily on increased foot traffic, but (and this is key) also strategic price increases and what I believe to be poor portion control. The company has denied any changes in portion sizes since opening....

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