Chipotle's Imminent Recovery

    By Austin O'Toole

    For the past couple of months, people have been telling me that I’ve been risking my precious life by eating at Chipotle.  The company has been plagued by a series of unfortunate events, in which an E. Coli outbreak was linked to multiple outlets across the country.  This event has resulted in a precipitous 30% decline in sales, which is practically unheard of.  While ”worry wart investors” have been scrambling to divest their money, I’ve been doing the exact opposite for three main reasons.

    Let’s get real; according to the CDC, 52 people were infected by the E. Coli virus by Chipotle chains across the country.  Without any context, this may seem like a huge number; however, considering that Chipotle restaurants serve around 750,000 people a day, this value becomes miniscule.  In fact, it’s so miniscule that if you took those 52 people and assumed that all of them were infected on the same day, your odds of being infected would only be about 0.0069%.  You’re 4 times more likely to die by choking on your Chipotle.  Not only that, but also, take into account that Chipotle is worth $200 million.  They clearly have enough resources to manage and resolve the problem. Thus far, they have dealt with the issue appropriately by implementing food safety standards and closing locations when they are affected, ensuring that consumers do not contract the virus.  

    Second, Chipotle’s strong reputation offers a large barrier to entry.  More often than not, a majority of millennials have flocked to this chain since it offers a healthier option to fast-food using fresh ingredients, making it more difficult for competition to succeed.  The most successful Mexican fast-food chains are Taco Bell and Qdoba.  With that being said, Taco Bell is designed for the more price-conscientious consumer, leaving Qdoba.  Although this Chipotle “catastrophe” was the optimal time for Qdoba to take a large percentage of Chipotle’s market share, they were unable to succeed.  Qdoba’s parent company, Jack in the Box, has found moderate success in recent months, making those “worry wart investors” turn to them as an alternative investment; however, looking solely at Qdoba, according to an article published by Time Magazine, Qdoba experienced an outbreak of Typhoid fever earlier in August of 2015, showing how their food is not any “safer” than Chipotle’s.

    This last point is for all of the Calculus nerds out there.  If you look at Chipotle’s stock over the past three to six months, you’ll notice a general parabolic trend, similar to that of f(x)=-x2. Now, although that it may appear that the value of each share is decreasing, one would notice by taking the second derivative that the rate at which it’s decreasing is decreasing.  In simpler terms, theoretically, this means that the stock price is starting to stabilize and should begin to increase once again, assuming Chipotle does not experience additional bad luck.  

    Obviously, this is all speculation; however, I’m almost positive that Chipotle’s stock will rise from the dead.  It’s reputation among millennials is still favorable, and Chipotle’s competition was unable to take a large percentage of the market. This suggests that many of Chipotle’s customers were simply waiting for the “storm to pass” and will return to their favorite burrito joint in the upcoming months.

 

Member Login
Welcome, (First Name)!

Forgot? Show
Log In
Enter Member Area
My Profile Log Out