Shares of Chipotle Mexican Grill Inc. plunged Tuesday after well-known hedge fund manager David Einhorn reportedly said that the burrito chain is facing increasing competition from Taco Bell as well as higher costs.
THE SPARK: Einhorn, who runs Greenlight Capital, was speaking at the Value Investing Congress, an investor conference, in New York Tuesday. The Wall Street Journal's website and other news sources reported his comments on Chipotle.
According to the Journal, Einhorn cited higher costs for food and health care for employees and a big challenge from Yum Brands Inc.'s Taco Bell, which has a new "Cantina Bell" menu. Einhorn says Chipotle customers like the new concept, and Taco Bell remains cheaper than Chipotle, with more locations.
Representatives for Greenlight and Chipotle were not immediately available to comment.
THE BIG PICTURE: While shares had dropped about 6 percent this year before Tuesday, Chipotle's stock has still more than doubled over the past five years. The company's revenue has grown by double-digit percentages every year since 2003, and analysts expect another strong year in 2012.
Einhorn's pronouncements can often have a major impact on a company's stock. After he expressed concerns about Green Mountain Coffee Roasters Inc. at the Value Investing Congress last year, the coffee company's stock plunged 10 percent that day. The shares have lost three-quarters of their value since then.
SHARE ACTION: Shares fell $14.74, or 4.7 percent, to $301.39 in afternoon trading.