The Future of Chipotle – Can Their Stock Make a Turnaround

Emerging in 1993, Chipotle was one of the first restaurants to serve healthy fast food. Being one of the first in the category of healthy fast food, Chipotle’s customer base grew rapidly, attracting many who had previously been deterred from fast food due to its lack of nutritional value. Opening new locations and growth of sales allowed Chipotle to reach a market cap of 23.41 Billion in late 2015.

For countless years, Chipotle seemed unstoppable in the fast food realm. After years of tremendous growth, Chipotle hit a massive roadblock in 2015 as illnesses such as E. coli and salmonella were reported by some of Chipotle’s customers. With hundreds victim to Chipotle’s sanitary issues, it’s stock took a turn for the worst. Reports regarding Chipotle’s sanitation continued, forcing Chipotle to temporarily close some stores. As their operating income plummeted from 764 million in 2015 to 35 million in 2016. When it finally solved its sanitary issues, the company was not the same. The huge customer base that it had built up was greatly diminished. The sanitary scandals put a bad taste in many of Chipotle’s customer’s mouths. Also, acknowledging the initial success of Chipotle, many other healthy fast food chains began to appear. These competitors capitalized on Chipotle’s sanitary issues by capturing some of their market shares.

Ever since their sanitary issues, Chipotle has struggled to return to its previous brand image and has seen decreases in same-store sales. This has caused the stock to sink from a high of $758 per share in in early August of 2015 to a low of $247 per share on February 9, 2018. Currently Chipotle has a market cap of 9 billion dollars with a P/E of 52. Looking at the P/E,  it is clear that investors still believe that Chipotle will eventually return to its former self and start earning profits like it was. It is on the right track, as it’s revenue went from 3.9 billion in 2016 to 4.47 billion in 2017. Also, Chipotle recently hired a new CEO, Brian Niccol, former Taco Bell CEO. His great track record in the fast food realm has brought new life to the Chipotle stock. Since they released the news on its leadership, its stock has risen from $251.33 to $322.70 per share.

Although news of Chipotle’s new CEO has temporarily boosted its stock, Chipotle is going to need strong earnings reports in the upcoming quarters to justify the continuation of this trend. In order to achieve these sales, Chipotle will need to regain lost customers.  Is it possible for Chipotle to regain these lost customers?  The amount of time it will take for previous Chipotle customers to regain trust in the brand is unknown. Some may never eat there again and some have already returned. Chipotle in our eyes has done everything they need to do to gain customer confidence and make the overall brand trusted again. Because Chipotle has laid the groundwork with 2,400 locations and not a single dollar of debt; they need to and have been putting millions of dollars into food safety. It has invested in its food suppliers to help it grow safer foods along with investing in its restaurants by educating employees.

At the high of Chipotle’s stock, they were one of the only restaurants in the healthy fast food business. Now, in order to reach their previous sales and profitability, Chipotle will have to compete with the numerous other restaurants that have emerged in the same category. This being said, there may also be more demand for healthy fast food than ever before.

Our Point of View:

Chipotle was wildly popular when it first came out, with lines out the door in certain locations. When the news regarding the sanitary issues came out, we saw many people turn away from Chipotle. Despite the decrease in sales, we haven’t seen a decline in the food quality. We always thought that at some point these customers would slowly return as the news blew over. On a smaller scale, from looking at our friends and family we have seen them beginning to venture back into being a Chipotle consumer. Recently, Chipotle released a 0.9% increase in same-store sales, which could just be the beginning.  Maintaining the high-quality food, opening new stores, and spending millions on food safety, is why we believe that Chipotle may be able to both regain and accumulate new customers, returning themselves to their prior sales and brand image.

Disclaimer: Do not invest your own money without doing your own research, our content is not meant to convince you to buy or sell a stock, but simply to share ideas and unique viewpoints.

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Is Fortnite’s HUGE Success Hurting Activision? Could It Help It In The Long Run?

How will Fortnite affect Activision?

Will Activision have a surprising next quarter? Will it continue its long uphill trend or will their next quarter earnings falter?

For countless years, Activision has dominated the gaming industry, as its stock has continued to break records and push higher. Nothing has been able to halt Activision’s rapid growth, however it may have just met its match: Fortnite.

Fortnite has taken the world by surprise and has dominated the gaming industry. Fortnite is a multiplayer game in which players can team up with friends to work as a team to become the sole survivors out of 100 starting players. The game has not only captivated the gaming community, but has also attracted many who weren’t involved in gaming before.  

As of January 15, 2018, Fortnite recorded 40+ million users. This is an incredible feat since they just released the game on July 25, 2017. How did they do it? First, they created a great game that people enjoy playing. But what separates Fortnite from most great games is that it’s free. This raises the question, are zero dollar entry level games the wave of the future? Will we see other games shift their revenue streams to capitalize on in game purchases similar to the Fortnite model. Additionally, why would someone pay 40 dollars to buy the new Black Ops (one of Activision’s top selling games) when companies are creating great games for free.

How will Activision be affected by Fortnite in the short term?

Fortnite’s exponential growth in popularity and traction may have a negative impact on Activision in the short term. Captivating much of the gaming community, Fortnite may hamper the sales of Activision as many will be reluctant to spend money on paid games when they can both play for free and play with their friends on Fortnite.

Are there any positives for Activision in regards to Fortnite?

Fortnite may be a negative for Activision in the short term, however, there could be possible positives to look for in the long term. From personal experiences, we have seen many people that weren’t into gaming before venture into the industry because of Fortnite. What percent of Fortnite’s 40+ million users are new gamers is unknown. Activision could turn Fortnite’s wild success into a long term positive by working to captivate the new market share of gamers created by Fortnite. As Fortnite’s popularity may fade, Activision has proven to be a strong company in the gaming realm throughout the years. If this happens, Activision has the potential to capture the new market share by selling games to these people who hadn’t previously bought games.

Will Fortnite impact Activision in the short and or long term? Or will it have no effect at all?

Disclaimer: Do not invest your own money without doing your own research, our content is not meant to convince you to buy or sell a stock, but simply to share ideas and unique viewpoints.

Could the Most Hated Snapchat Update Actually Boost the Companies Sales?

Although the snapchat update has received a lot of hate, could it still be helping their sales?

Recently, Snapchat is under fire as the response to their update has been anything but positive. With all the negative user reviews, one might  think that Snap would consider retracing its steps and return to its old platform. However, the company has shown no signs of this retraction as Ceo and Founder Evan Spiegel said, “We’re excited about what we’re seeing so far,” and continues stating “The best part is that even some of the complaints we’re seeing reinforce the philosophy [behind the design].” As you can clearly see, he completely disregarded the hate the update has been receiving and the 1.2 million people that have signed the petition to change Snapchat back to its prior form.

It leaves people asking the question, “Why does Snap keep the new update if no one likes it?”

The answer to this question: revenue.

Although Snapchat currently has 187 million daily users, it is and has been losing money for years.

Snapchat’s stock has finally started to rally as it posted record breaking fourth quarter earnings on February 6, 2018, of 285,693 million dollars, however, the company still lost 28 cents per share or 159 million dollars. Despite the hate regarding the new update, the update itself looks like it could continue the uptrend in Snap’s sales.

A lot of people have been outraged with the way Snapchat’s signature story feature is now positioned on the left side of the app which makes it much harder to rewatch stories. Personally, we don’t like it either, but will it make us and our friends stop using the app? No! The reason being is our streaks are way too valuable to throw away because of an update.

The new update now leads the consumer to the right side of the app, where the stories used to be. This whole side of the app is now dedicated to the discover section. This is where Snapchat makes most of their revenue, as there is a lot of sponsored content from companies, and many ads in between the content. Additionally, a slight but important new feature to the app is that when a particular story or headline is over, it doesn’t take you back to to the displayed section of news, instead, it goes right to the next popular story, headline, celebrity sighting, or sporting event, keeping the user engaged, and more importantly presenting them with more ads.

How will Snapchat’s revenue be affected by the new update?

We believe the new Snapchat update was designed as a way to increase ad revenue. While increasing ad revenue, this new update has received an echoing negative response from many Snapchat users. Will this lead to a significant drop in Snapchat’s huge daily user base? If so, will the new revenue model in the update make up for the lost users?

Let us know your thoughts on this bold move from Snap.

Disclaimer: Do not invest your own money without doing your own research, our content is not meant to convince you to buy or sell a stock, but simply to share ideas and unique viewpoints.