Chipotle

CMG short interest is at $776 million, with 1.88 million shares shorted. The stock was up 2.6% during the day & is now up 8% in the aftermarket on strong 3rd Quarter results. Shorts are down $54 million in mark-to-market losses today, adding to the $591 million incurred YTD. Shares shorted fell by 230 thousand over the last week ahead of the earnings call. We may see more short covering tomorrow morning if CMG’s stock price continues to surge.

Chipotle Mexican Grill Inc. (CMG) handily beat its EPS estimates for the 1^st and 2^nd quarters of 2017 but came up far short in its 3^rd quarter results. Chipotle reported EPS of $0.69 which more than doubled last year’s $0.27/share but missed the street estimate of $1.63/share. Revenues were up 8.8% from last year’s figures and revenues were only slightly below analyst’s estimates but maybe Chipotle should not have reported so close to Halloween as their “event jinx” continues.

Diners usually have their coffee after their meal but over the last month, short sellers have put specialty coffee retailer Starbucks Corp. (SBUX) ahead of Chipotle Mexican Grill Inc. (CMG). Starbucks is now the largest short in the Restaurant Sector with $1.6 billion of short interest, an increase of $754 million over the last month, which was a 94% increase in SBUX short interest while the overall Restaurant Sector increased by only 8%. For the year, SBUX short interest increased by $833 million, or 115%, while short interest in the Restaurant Sector increased by only 10%.

Chipotle Mexican Grill Inc.’s (CMG US) stock price fell to over a 4 year low on Wednesday but has since rebounded over $9 in just two days. Stephen’s upgraded Chipotle to “equal-weight” but lowered their target price to $325, 34% below 2017’s year-to-date high. The analyst’s projections may signify a temporary floor to Chipotle’s 19% year-to-date price drop but a much lower ceiling to its recovery.

For Chipotle Mexican Grill Inc. (CMG US) it must seem like déjà vu all over again as it was forced to close one of its Virginia restaurants due to a norovirus outbreak that made several of its patrons ill. CMG stock was down as much as 7.5% in intra-day trading and closed down $17.02/share, or 4.34%. Even though this looks to be an isolated outbreak, investors and Chipotle customers can remember the E. coli and salmonella outbreaks in the fall of 2015, which drove CMG’s stock price down almost $350/share, or 46%. Chipotle’s executive director of food safety, Jim Marsden, assured the public that the norovirus illness did not come from Chipotle’s food supply and “it is safe to eat at Chipotle.”

In a recent SEC 8-k filing Chipotle Mexican Grill (CMG US) stated that increased marketing and promotional expenses would continue to partially offset same store sales growth as the restaurant chain continues to try and lure back customers after food related illnesses crushed sales in 2015. This news, in addition to this year’s operating costs continuing their upward trajectory and same store sales growth rising but missing analyst’s projections, caused CMG stock to fall 9% on 6/20-21.

While Bill Ackman of Pershing Square Capital has been accumulating a 9.96% stake in Chipotle Mexican Grill Inc. (CMG US), worth $1.07 billion, short sellers have been steadily building positions of their own. Short interest in Chipotle has hit a historical high this week, topping $2.3 billion for the first time. Short interest has been growing since the 4^th quarter of 2015 and is up 94% in 2016.