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Chipotle Relative Strength in After Market Noteworthy: Adami

On Wednesday, the traders were taking a second look at Chipotle, after the burrito maker released earnings that missed estimates.

The company said higher costs for things like antibiotic-free meats and organic produce bit into margins.

Fourth-quarter net income was $57.5 million, or $1.81 per share, compared with $46.4 million, or $1.47 per share, a year ago.

Analysts, on average, had been expecting $1.83 per share, according to Thomson Reuters I/B/E/S.

Shares fell 2.4 percent to $361.66 in extended trading.

“One would have thought the stock would be down a lot more than it is,” muses trader Guy Adami. “It trades at 42 times forward earnings.”

The fact that the stock didn’t sell off more after relatively weak earnings suggests to Adami that dips remain a buying opportunity.

Chipotle was one of the best performing stocks of 2011 and that’s something that gives Mike Murphy pause. “A lot of high fliers are taking a breather – they have to maintain their growth to maintain their valuations.”

Chipotle has been a high flier; the stock debuted at $22 in 2006, and closed at a new high of $370.42 on Wednesday. It is one of the restaurant industry's best performing names, largely due its ability to hold down labor costs while growing rapidly.

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Trader disclosure: On Feb 1, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami owns C; Adami owns GS; Adami owns MSFT; Adami owns AGU; Adami owns NUE; Adami owns INTC; Adami owns BTU; P. Najarian is long AAPL; P. Najarian is long BAC; P. Najarian is long C; P. Najarian is long JPM; P. Najarian is long WFC; P. Najarian is long MS; P. Najarian is long MSFT; P. Najarian is long QCOM calls; Murphy is long MTW; Murphy is long POT; Murphy is short WHR

For Kevin Landis
First Hand Technology Funds owns Facebook shares

For Rijay Rakesh
(QCOM) Sterne, Agee & Leach, Inc. makes a market in the shares of the subject company.
(RIMM) Sterne, Agee & Leach, Inc. makes a market in the shares of the subject company.

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