Chipotle has definitely seen better days. Since its peak of $757 in 2015, the share price has been in a near free fall with revenues moving in the same negative direction. Partly to do with the onslaught of image damaging news related to Food Safety, Chipotle is now furiously trying to save its image. It even has a webpage dedicated to food safety incidents in an attempt to increase transparency with customers. The question is can Chipotle turn things around? Has the recent food incidents tainted its image for good? We’ll look to Google Trends for some clues.
Internet Search interest in the term ‘Chipotle Mexican Grill’ collapsed the month following the disclosure of contamination in August 2015. We note that searches then started ramping up in November only to fall again in December 2015, the same time that another outbreak was reported.
Since the December incident it would appear that search interest has been trending downward with revenues and share price following in an almost lock step fashion. Chipotle has taken measures to address the contamination issues by taking accountability and ensuring that each location has proper procedures in place to mitigate these sort of events from happening again. While these measures are all welcomed, it may be a little too late as customers weary of another outbreak stay away. This sentiment appears to be confirmed by the negative internet search trends.
With the share price having dropped over 40% from its all-time high, some may be inclined to want to take a position at a discount. We warn investors that even at the current price of ~$400 the stock still trades at 60 P/E which taking into consideration the negative revenue growth, does not seem like a discount at all.