A Morgan Stanley analyst on Monday said that soup and sandwich chain Panera appears to be losing ground to competitors and expects a pickup in customer traffic at burrito chain Chipotle.
Panera Bread Co. stock dropped while Chipotle Mexican Grill Inc. shares rose.
THE SPARK: Morgan Stanley analyst John Glass upgraded Chipotle to "Overweight" and downgraded Panera to an "Equal Weight" rating.
THE BIG PICTURE: Fast-casual chains like Panera and Chipotle have become a popular alternative to chains such as McDonald's because they're seen as offering higher quality food for a little extra money. But competition is increasing within the sector.
THE ANALYSIS: Glass said Morgan Stanley surveyed 1,500 restaurant customers about their perception of fast-casual chains, and found that Chipotle scored high on perception of value. That suggests traffic gains to come, Glass said. He also believes Chipotle's food is cheaper than that of its competitors, and it may raise prices next year, which could bring in more revenue for the company.
But Panera's perceived value was a weak spot in the Morgan Stanley survey. The company also faces slowing catering growth.
Panera and Chipotle could not immediately be reached.
SHARE ACTION: Chipotle shares rose $8.91, or 2.1 percent, to $427.91 during afternoon trading, setting a new 52-week high of $429.78 earlier in the day. Panera shares fell $5.69, or 3.5 percent, to $158.34. The stock has traded between $153.65 and $194.77 over the past year.