Why This Key Analyst Isn’t Hungry for Chipotle
Chipotle Mexican Grill shares slumped early on Monday after the stock was downgraded by a key analyst.
Chipotle Mexican Grill Inc. (NYSE: CMG) shares slumped early on Monday after the stock was downgraded by a key analyst.
Wedbush downgraded Chipotle to Underperform from Neutral with a $445 price target, implying downside of about 14.5% from the current price level. The firm sees increased risk to near-term same-store sales (SSS) growth and margin expectations, with continued risk to margin expectations through 2020.
Overall, the firm’s third-quarter-to-date checks suggest SSS growth trending below the 5.7% consensus. Monthly cadence in the third quarter of 2017 consisted of a tougher July (+4.5%) and September (+6.0%), which laps the launch of Queso. As a result, considering an easier August comparison and a July comp roughly in-line with the second quarter’s 3.3%, there should be a higher SSS growth rate in August than its checks imply. Wedbush attributes a slowdown to the Ohio outbreak. The firm believes a higher year-over-year promotional cadence through the end of the third quarter is likely. However, Wedbush is lowering its third-quarter SSS growth estimate to 4.5% from 5.5%.
As a result, Wedbush lowered its earnings estimates for the next few years. The firm lowered its 2018 EPS estimate to $8.64 from $8.85, 2019 estimate to $11.43 from $11.47 and 2020 EPS to $14.00 to $14.19.
Shares of Chipotle closed Friday at $520.71, with a consensus analyst price target of $462.43 and a 52-week range of $247.52 to $530.68. Following the announcement, the stock was down about 1.5% at $513.00 in early trading indications Monday.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
