March 28, 2016 | 11:19 AM by Fahad Khalid | fkhalid@jaguaranalytics.com

Unlock: Chipotle (CMG) Trade Idea

(This CMG Trade Idea was issued on February 23 for $3.00. Trade was closed today for $7.10 or +136% gain.)

Chipotle
Ticker: CMG
Sector: Restaurants
Current Price: $516.15
Target: $475.00
Stop Loss: $530.00
Time Duration: 52 days

Trade Idea – Buy CMG April 500-475-450 Put Butterfly Spread for up to $3.00 debit.

Note the mark on this trade currently is $2.55 but we are willing to buy up to $3.00 cost given wide bid/ask spread. We want to make a bearish bet that short covering in CMG is over and we see the stock going back to $475 level in coming weeks. But to keep the cost as low as possible, we are using slightly out of money put butterfly spread.

CMG Fly

We expect CMG to follow through with strengthening of its food safety program, but we remain unsure when a comp rebound will materialize, suggesting this uncertainty will likely limit and further near-term share price outperformance. CMG posted -36% January comp and the trend will likely improve from this level in coming months with the CDC clearance, national team meeting and more aggressive marketing. However, we struggle to press a bullish case given a lack of visibility on comp reacceleration and its current valuation of 30x forward 2017 EPS forecast.

Resistance at $530. Support at $430. We are looking for move back down to $475 level in coming weeks (dotted line).

CMG Chart

#CMG
Sign up for a four-week trial!

Password must meet the following requirements: