Today's Decline In Chipotle Not A Buying Opportunity, According To Cowen

Chipotle Mexican Grill, Inc. CMG confirmed Tuesday that several customers who dined at a restaurant in Virginia reported symptoms of norovirus. A total of eight people indicated on iwaspoisoned.com they suffered from vomiting, stomach pains, diarrhea, dehydration and even hospitalization after eating at the restaurant chain.

Chipotle's executive director of food safety said the norovirus doesn't come from its food supply but the company still took a precaution by closing the store and performing a complete sanitation.

Nevertheless, Chipotle's stock lost more than 6 percent and this shouldn't be viewed as an attractive entry point, at least according to Cowen's Andrew Charles.

Still Some Uncertainty

The norovirus event is likely isolated to the one restaurant in question but at the end of the day there is some uncertainty as to how consumers will react, the analyst noted. After all, the E. coli epidemic could still be fresh in consumer minds although the norovirus is "far more common and less severe" compared to E. coli.

Chipotle closed the affected restaurant for a complete cleaning and the fact that it's scheduled to re-open at 2 p.m. ET Tuesday signals the presence of E. coli is "unlikely," Charles added.

Meanwhile, Chipotle's stock is trading at a 29x multiple on 2018 P/E and 13.1x multiple on 2018E EV/EBITDA, which isn't a "favorable" entry point for investors. Also, comps have been lagging investor expectations over the past year and a half.

Bottom line, the analyst is waiting for any commentary from management before making any changes to his estimates and outlook. Charles maintains a Market Perform rating with an unchanged $440 price target.

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