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Have We Had Enough Chipotle?

On Friday, Chipotle Mexican Grill (CMG) reported earnings. Though they barely missed analysts’ estimates, investors were clearly displeased, especially at first.

At one point on Feb. 15, Chipotle’s stock had plunged 12%. It recovered to end the day with a 3% loss.

Chipotle is a great company with tasty products (one of which – crispy vegetarian tacos — I consumed for lunch today) and strong growth prospects. But the stock has also been relentlessly hyped over the past year.

That worried me. So last November, just in time for Thanksgiving Day, I chose Chipotle as one of the stock market’s “overstuffed turkeys.” I wrote in part:

“For all the optimism about Chipotle, its stock price could lose some spice eventually. For one thing, rapid growth often creates unexpected challenges. Also, it may be tough to keep costs in check, especially as food prices rise. … Finally, there’s the question: How many burritos can Americans eat? Eventually the chain’s growth will reach some natural limits.”

But it’s too early for me to gloat.

How long could Chipotle’s fiesta go on? Lots of other overhyped stocks have laughed at the skeptics for months and years as their share price kept moving ever higher. The strong rebound for shares in afternoon trading suggests there are a lot of Chipotle fans who saw weak results as just another chance to take a second helping of the chain’s shares.

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