It looks like David Einhorn's latest prediction may be coming true.
Shares of Chipotle Mexican Grill (CMG), which Einhorn recently recommended shorting, got slammed after the casual restaurant chain reported earnings that fell short of forecasts. And, although revenue was roughly in line with estimates, investors were disappointed.
Chipotle's stock sank more than 10% after-hours Thursday. On Friday, shares fell more than 15% before gaining back some ground.
I fortuitously bumped into Einhorn on my way out of the Time Warner Center (where CNNMoney is housed) Thursday night. Einhorn, the founder of hedge fund Greenlight Capital, said he wasn't surprised by Chipotle's earnings but hadn't had time to dig into them yet.
Earlier this month, Einhorn told investors to bet against Chipotle's stock. Einhorn, known for his early calls on the looming blow up of Lehman Brothers, said Chipotle's torrid growth pace wasn't sustainable, particularly with Yum! Brands' (YUM) Taco Bell making a push into upscale burritos.>
Consumers, who once seemed to have an endless appetite for Chipotle's burritos, appear to be losing it. The company's pace of growth has been steadily decelerating over the last several quarters.
Sales at stores open for more than one year rose 5% during the third quarter. That's down from last quarter's 8% growth and far below a year earlier, when sales were up 11%.
Until recently, Chipotle had been one of the highest-flying stocks, with its shares doubling over the past five years. This year, its shares are down nearly 28%.
Tuesday brings the unofficial start to third-quarter earnings season, with aluminum producer Alcoa (AA) and KFC-owner Yum Brands (YUM) reporting after the closing bell.
Alcoa is typically considered the kick-off to earnings since it's the first major Dow (INDU) component to report. It's also considered a bellwether of the economy because of its global reach.
But Yum may actually grab the spotlight because of its large presence in China, where report MORECatherine Tymkiw - Oct 9, 2012 11:55 AM ET
Hedge fund manager David Einhorn's newest short target: Chipotle Mexican Grill (CMG).
Greenlight Capital's Einhorn thinks Taco Bell, owned by Yum Brands (YUM), will eat Chipotle's lunch with its new Cantina-style menu.
Chipotle was one of four stocks that Einhorn discussed during his presentation at the Value Investing Congress in New York. He also spelled out a case for why investors should buy General Motors (GM) and health insurer Cigna (CI). MOREMaureen Farrell - Oct 2, 2012 12:56 PM ET
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