Chipotle’s e.coli scare is affecting more than just the popular burrito chain’s customer base — investors who might have once believed in the now controversial restaurant are being left out to dry.
According to Market Watch, as a result of Chipotle’s recent controversy, its stock has plummeted — down 28% for the year as of Dec. 28.
The restaurant chain has recently been playing damage control after a chain of outbreaks of e.coli and norovirus. Multiple restaurants have been affected, and customers are reportedly falling ill — suffice it to say, Chipotle is facing quite a public relations nightmare.
Chipotle and the Center for Disease Control are investigating the causes of the outbreaks, but so far it remains unknown. The damage done to Chipotle as a brand, however, is currently looking rather dire.
Investors, once captivated by the stratospheric growth of the burrito restaurant, have been left weary. Their success and eagerness to expand, however, are red flags for market analysts.
In situations like Chipotle’s — that is to say massive success and speedy growth followed by disaster — it is often speculated that quality standards suffer.
While the cause of the e.coli is currently unknown, Market Watch points out that Chipotle has nearly quadrupled its number of restaurants to nearly 2,000 in the past decade. In the past three years alone it has opened nearly 500 new locations.
With this type of growth, it follows that investors were at that time very eager to get in on the ballooning success of Chipotle. Market Watch contends that veteran investors should have known that companies that see the kind of rapid success that Chipotle enjoyed should be cautious.
Additionally, as a result of its success, Chipotle’s stock has always been expensive. That means that, due to the massive hit their stocks just took, there are potentially very many investors who might have lost a lot of money due to scandal.
Despite all of this, however, Chipotle’s stock prices remain high, and certain analysts still recommend it.