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Morning Brief: Chipotle Plunges, Snap Surges

Shares of the fast-casual chain tanked after the company released disappointing guidance, while social media giant Snap surged on better-than-expected quarterly results.

  • By Stephen Taub

Shares of Bill Ackman favorite Chipotle Mexican Grill sank 10.6 percent on Wednesday, to close at $272.20, after the casual dining chain issued disappointing guidance for 2018. In addition, several investment banks trimmed their price targets for the stock on the same day. For example, UBS reduced its price target from $290 to $275, noting that sales trends remain sluggish at the same time that cost pressures are weighing on earnings.

“We believe a new perspective and strategy could support improvements, but near-term trends are unlikely to benefit and earnings could be negatively impacted by an earnings reset,” the bank tells clients in a note.

Meanwhile, Barclays cut its price target from $325 to $305 and maintained its equal weight rating. It noted that the 2018 guidance was no surprise and that concerns about food safety have abated. However, it still concedes, “we struggle to put new money to work here.” In December 2016 Chipotle agreed to add four board members as part of a compromise settlement with Ackman’s Pershing Square Capital Management. At the end of the third quarter Pershing Square remained the largest shareholder.

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Big day for Snap. Shares of the social media giant and hedge fund favorite surged nearly 48 percent on Wednesday, to close at $20.75, on more than 10 times its average volume, after the company reported much better quarterly results than investors were looking for. The stock is now at its highest price since early June. At the end of the third quarter, Tiger Cub Coatue Management, a Snap investor when the parent of Snapchat was private, remained the second largest shareholder. The stock was also a significant holding of three other funds with roots to Julian Robertson, Jr.’s Tiger Management: Glade Brook Capital Management, Tybourne Capital Management HK, and Valiant Capital Management.

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Shares of Tesla, the stock hedge funds like to hate, are poised to rise at the open after the controversial electric car maker reported a smaller than expected loss in the most recent quarter. As a result the stock rose around 2 percent in after-hours trading after climbing 3.3 percent, to $345, in the regular session. The stock is the largest equity short in the U.S. market and the third largest worldwide, according to S3 Partners, an independent financial data, analytics, and services firm.

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