Shares of restaurant chain Chipotle (CMG) are up more than 4% this afternoon after plans outlined on a morning conference call seem to have found favor with investors.
Chipotle has been under pressure recently — it’s down nearly 30% in the past six months, and was a famous short for hedge fund manager David Einhorn back in October. We at Barron’s are bearish on the stock, a position we reiterated yesterday after its fourth-quarter earnings preview disappointed.
Chipotle’s facing several problems, not least rising food prices. But some also think that, trading at 28 times forward earnings, it’s overvalued — one reason why it’s a consensus Hold among Wall Street analysts.
But as Annie Gasparro at Dow Jones Newswires reports, Chipotle may have decided to get more aggressive:
“While we haven’t made any decisions yet, the fact that our food costs are rising, it is more likely that we’ll raise prices,” said Chief Financial Officer Jack Hartung on a conference call. “Now, we’re not going to rush into it … but we’re looking at … possibly raising prices during the middle of 2013.”
Additionally, Chipotle said its increased advertising, new catering business and more restaurant openings will also help improve sales trends this year.
Higher prices, to go with (previously announced) plans to grow the business and have more marketing — it’s no surprise the stock’s seen a jump. That said, today’s rise could also be something of a bounce from yesterday’s session, which saw the stock drop 5.5%. Perhaps once the shock of the pre-earnings guidance wore off and company executives made reassuring noises, some investors were willing to take another look.
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