2-Star Stocks Poised to Plunge: Chipotle?

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, burrito specialist Chipotle Mexican Grill (NYS: CMG) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Chipotle's business and see what CAPS investors are saying about the stock right now.

Chipotlefacts

Headquarters (founded)Denver (1993)
Market Cap$12.3 billion
IndustryRestaurants
Trailing-12-Month Revenue$2.3 billion
ManagementFounder/Chairman/Co-CEO Steve Ells
Co-CEO Montgomery Moran
Return on Equity (average, past 3 years)22%
Cash/Debt$456.3 million / $3.7 million
CompetitorsPanda Restaurant
Qdoba Restaurant
Taco Bell

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 16% of the 2,994 members who have rated Chipotle believe the stock will underperform the S&P 500 going forward.

A couple of months ago, one of those bears, jwilbanks, touched on the headwinds working against Chipotle:

The world is deleveraging, the consumer is tapped out, and this is a niche business that sells $8 burritos that is beyond the budget of most families. Who eats there besides young people? Their faithful followers will eventually tire of paying for a premium priced product that is mostly beans and rice and short on meat. Not to mention that it's a high fixed cost business with limited growth potential while priced for 30% [compound annual growth] for the next 10 years. ... All it will take is one bad headline from Europe, QE3, or a slight earnings miss and watch it implode like Netflix.

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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Chipotle. Motley Fool newsletter services have recommended buying shares of Chipotle and Netflix. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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