Chipotle Mexican Grill (NYSE:CMG), a fast-casual Mexican grill, closed at $32.65, up 6.10%. The stock moved after reports said Starbucks had explored a takeover, and investors are watching the Oct. 28 earnings report and Boorito-season sales trends. Trading volume reached 63.7M shares, coming in about 271% above its three-month average of 17.2M shares. Chipotle Mexican Grill IPO’d in 2006 and has grown 3,610% since going public.
How the markets moved today
The S&P 500 (SNPINDEX:^GSPC) closed at 7,766, down 0.46%, while the Nasdaq Composite (NASDAQINDEX:^IXIC) finished at 27,193, down 1.25%. In restaurants: limited-service, fast-casual Mexican food, McDonald’s (NYSE:MCD) closed at $236.88, up 2.60%, and Restaurant Brands International (NYSE:QSR) closed at $70.65, up 1.76%, as takeover speculation kept Chipotle and related restaurant names in focus.
What this means for investors
Brian Niccol might be creating his own homecoming to Chipotle after a report surfaced that Starbucks (now helmed by Niccol) was interested in acquiring the burrito chain he once led. CMG shares popped 6% on the revelation today, after the market was largely unmoved on rumors of the deal earlier in the week.
While the idea of leveraging Niccol’s experience at both restaurants makes sense, I’m not sure the deal’s size or pricing works as well. Starbucks has a $107 billion market cap, but it would likely have to pay over $45 billion for the Mexican food chain, which would be tough to stomach, balance-sheet-wise.
On a personal level, one of my daughter’s core positions is Chipotle, as it is one of her favorite restaurants, but I don’t have a major reaction to today’s news either way. I’m happy to keep holding shares of the once-high-flying growth stock for my daughter, but I am not interested in front-running a potential M&A deal.
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