What's Next For Chipotle?
Shares of Chipotle Mexican Grill, Inc. (NYSE: CMG) fell about 0.4 percent ($2.39) on Monday.
Barron's said on Friday that the company is “losing its spice.” According to analyst Jack Willoughby, the stock could tumble another 15 percent to 20 percent (it's down more than 17 percent from its February high of $727.97) as the restaurant chain faces new challenges in its path to growth.
Barron’s seems to be the most bearish regarding Chipotle. All of the price targets issued by major Wall Street research firms since February imply upside from the current stock price. Willoughby disagrees, and the crowd seems to differ with Wall Street analysts as well; sentiment is currently more bearish than bullish, according to StockTwits.
A Look Back
Back in 2012, a similar situation took place. The stock had become one of the most popular in the fast-casual dining space, delivering astounding growth rates in many areas of its operations. When the stock price surpassed $400, however, many started to see it as a growth trap.
In six months, the stock price tumbled from a high of $442.40 to roughly $250, after the company missed expectations in two consecutive quarters. With the hype over, it took almost a year for the stock to recuperate the ground lost.
Related Link: Consumers Rejoice As Chipotle Confirms Return Of Carnitas
Should investors expect something similar in this occasion?
The outcome is yet to be seen. Just like in 2012, sentiment is becoming more bearish following two consecutive revenue misses. As explained by Willoughby, “Joseph Parnes, who runs advisory Technomart RGA, with $188 million in assets, thinks another disappointing quarter could push the stock down another 15% to 20%, to under $500. He is short the shares.”
Analysts Differ
In a recent report, Miller Tabak’s analyst Stephen Anderson presented a different thesis that involves upside for Chipotle’s stock. The analyst rates shares a Buy and set a $725 price target, arguing that, “There Remain Multiple Levers for EPS Growth Well Above Peers [and that the] Recent Pullback Provides Opportunity for Upside.”
On the other hand, Wedbush analysts remain sidelined as they, “continue to believe current valuation appropriately reflects lower visibility into Chipotle’s near- and medium-term SSS growth trajectory and margin opportunity, buttressed by industry-leading unit economics.” Consequently, they rate the stock as Neutral and give it a $620 price target.
Latest Ratings for CMG
May 2015 | Deutsche Bank | Initiates Coverage on | Hold | |
May 2015 | Miller Tabek | Upgrades | Hold | Buy |
May 2015 | BMO Capital | Upgrades | Market Perform | Outperform |
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