Chipotle (CMG) shares rose during four days in October on reports that Starbucks (SBUX) had worked on a takeover proposal, but Starbucks flatly denied it on Oct. 12. Chipotle is down roughly 30% over the past year and sits near its 52-week low, with no buyer in sight. The author argues the deal made little sense because Starbucks is still mid-turnaround, and that a sale at a depressed price would mainly help holders who want out. On recovery, comparable sales rose 0.5% in Q1 and 2.2% in Q2, but restaurant-level operating margin fell 220 basis points to 25.2%, so the author wants two or three more quarters of rising sales with stable margins. The Q3 results on Oct. 28 are seen as the key test.
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