CMG Chipotle Mexican Grill: My CMG earnings play

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	Wesley To
	Mill Creek, WA User since Jul 2011	64
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My CMG earnings play

I like this company. I think that they have potential to grow. However, I believe they are going to miss on earnings tonight.

1. Price increase. People don't change prices unless they are meeting expectations.

2. Expansion, they are finally introducing a new Asian themed restaraunt because the numbers on Chipolte are slowing down and they need another source of revenue.

3. P/E value of over 50 is very hard to maintain

4. Just like Apple the expectations are high. I read they need something like 600 customers averaging $8 per day in every restaraunt 365 days a year in order to meet this expectation. Thats a lot of burritos.

I believe there will be a correction in this stock tonight then I will go bullish again.

My play:

1. I am playing a calendar spread by SELLING the Oct. $300 CALL and BUYING Nov. $310 CALL.

2. I am also buying a straight Oct $300 PUT.

I like earnings.

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What People Are Saying...

Wesley To said at 10/20/11 3:09 PM Price action was $309.39 -0.84 (-0.3%)

Note: I think I may need to buy closer to the money as there will be zero time value. I am moving bought PUT to $305

Wesley To said at 10/20/11 4:17 PM Price action was $307.49 -2.78 (-0.9%)

Well, I went the wrong way. EPS $1.90 compared to $1.84 consensus. Their forward outlook doesn't look that great to me, I may just drop watching this stock altogether. Beating the street came from the price increases and store expansions, not comparable stores sales.

Wesley To said at 10/20/11 4:24 PM Price action was $307.91 -2.36 (-0.8%)

hmmm, I find it funny that the two main reasons I bet against them are the reasons they prospered this quarter. Ouch.

Wesley To said at 10/25/11 1:13 PM Price action was $339.10 -3.39 (-1.0%)

Taking my loss, I went the wrong way. I let other people opinions affect my trade here.