The Exchange

Chipotle: BofA/Merrill Says Slump Makes It a Buy

The Exchange

Chipotle (CMG), whose shares have been slammed for months, had its best day in three and a half years Tuesday after positive comments courtesy of a Wall Street analyst.

The stock gained 5.46% to $279.69 on word that Bank of America/Merrill Lynch, believing it's reached a good point to purchase after its steep selloff, upgraded Chipotle to buy from neutral with a $320 price target. The last time it had a bigger percentage move upward in a single day was March 17, 2009, according to FactSet.

View photo

.
Chipotle Chart

Strong days aren't what the Tex-Mex fast-food chain's stock has been known for since the summer, when worries about its growth rate started setting in -- the chart above shows the year-to-date performance. Two of the stock's four worst days ever have been recorded in the second half of this year. On July 20, the shares slumped 21.51%, and on Oct. 19, they fell 15.01%.

Chipotle has a 52-week range of $233.82 to $442.40 (its all-time high), and it was still above $400 until the day in July when a sales shortfall sent investors heading for the exits. On that day, the stock slid $86.88.

At this point, BofA/Merrill's price target is slightly ahead of the average of just above $315. The buy rating is also one of the few. FactSet shows just six analysts have a buy or overweight on the stock, while 16 have a hold or sell.

Going into Tuesday's trading, Chipotle had shed 40% from its best level earlier this year.

View Comments (26)