Mad Money

Sell Block: Chipotle Is Too Hot to Handle

Chipotle is too expensive and the stock needs to be sold, Cramer said during this week’s edition of Sell Block.

Trading at twice its growth rate, Chipotle has reached the same peak as other Cramer favorites Starbucks and Whole Foods . It’s more of an “impenetrable ceiling,” as he called it.

“When a stock gets at this level, you just have to sell,” Cramer said, adding that the chance to boost share price diminishes, but the slightest mistake can send the stock spiraling downward.

Just for perspective, keep in mind that Google , a $600 stock many on Wall Street say is too expensive, is only trading at just over one time its growth rate. At Chipotle’s valuation, Google would be fetching about $1,200 a share. At that point Cramer would call Google expensive.

Besides, let’s not be hogs here. Cramer recommended CMG on Feb. 22, 2006, at $43.87. Now the stock is at about $128. That’s almost a 200% gain.

Remember, CMG isn’t expensive because it’s at $128. It’s expensive because it’s trading at two times its growth rate. And Cramer learned during his years as a hedge-fund manager that that was the cutoff point for growth stocks. For that reason, “Chipotle need to be sold,” he said.

Questions for Cramer?

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