When Chipotle printed a first-quarter earnings beat on April 25, the stock closed almost 13% higher the following day. After a period of consolidation, Chipotle went on to reach a new all-time high of $2,175 on July 18 and July 19, forming a bearish double top pattern.
For the first quarter, Chipotle reported revenue of $2.4 billion, which missed the $2.34-billion consensus estimate. The company reported earnings per share of $10.50, beating a consensus estimate of $8.91
For the second quarter, analysts, on average, estimate Chipotle will report earnings per share of $12.31 on revenues of $2.53 billion.
Ahead of the event, BofA Securities analyst Gregory Francfort maintained a Buy rating on Chipotle and raised the price target from $2,200 to $2,570. Baird analyst David Tarantino maintained an Outperform rating on the stock and raised a price target from $2,200 to $2,400. Read More…
From a technical analysis perspective, Chipotle’s stock looks neutral heading into the event, having settled into a downtrend pattern on the daily chart but trading near all-time highs.
It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat. A company’s guidance for subsequent quarters, which is often provided during a conference call, can also heavily affect a stock’s direction.
Although Chipotle is trading in a bearish downtrend, the stock has been consolidating under the July 18 and July 19 all-time high, which suggests Chipotle may be gathering the strength for a blue-sky run.
- The consolidation has been taking place on lower-than-average volume, which suggests traders may be sitting on the sidelines as the company heads into its earnings print. After the results are released to the market, traders can watch for increased volume to enter the stock.
- Bulls want to see big bullish volume come in and break Chipotle up to a new all-time high. Bearish traders want to see the stock fall under $2,040 level on high volume, which could accelerate a move to the downside.
- Chipotle has resistance above at $2,147 and at $2,175 and support below at $2,040 and at $2,014.
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