Investing In: Chipotle Stock
Foursquare’s perfectly accurate prediction of Chipotle’s (CMG) 30% sales drop, which was made two weeks prior to Chipotle releasing its earnings report, still blows my mind. Foursquare was able to accurately foresee how this would affect Chipotle’s stock price, dead on. I wish I had access to Chipotle’s foot traffic patterns like Foursquare does, due to the several million people who update Foursquare daily to let their friends (and therefore Foursquare) know exactly where they are and where they’ve been.
Massive data like this is not something that is readily available to the public (not that I’m aware of, at least) so foot traffic patterns may be a thing of the future for investing. However, for today, something that is widely available to analyze an investment is social data. Social data is an amazing predictor of stock prices when it comes to companies whose primary customer are Twitting Instagramming millennials.
Like the name suggests social data is just a round up of all the Tweets and social posts around a company, related trending topics, sentiment, etc.
Foursquare saw a decent drop in foot traffic right after the Chipotle E Coli reports. However, the social data shows that the “buzz” and “hype” around Chipotle is no where near what it was right before the E Coli outbreak. This social data tracked the social mentions about either eating at, intending to eat at, or having recently ate at a Chipotle.
According to TickerTags, lunch +Chipotle and dinner +Chipotle are down 43% and 50% compared to their social mention volume before the outbreak.
Chipotle has been a strong favorite of many investors for a while, until the outbreak & declining revenue of 23.4% since a year ago, which was Chipotle’s first loss to date.
However, here’s why I’m not completely against Chipotle as a potential investment now.
Chiptopia.
Chipotle is planning to add a rewards program called Chiptopia, they registered the trademark May 16 of this year. Multiple studies have show that customers return 20% more often to a restaurant if there is a rewards program. This could reinvent Chipotle’s hype. Chiptopia hasn’t gotten much press other than a few food focused blogs, but maybe as it picks up more speed, and once the rewards card gets an official release, the company could begin to pick up some steam again.
Disclosure: None.