Wall Street Isn't Happy With Chipotle's Latest Food Safety Scare

Chipotle Mexican Grill, Inc. CMG investors can’t seem to catch a break lately. The stock fell 4.4 percent on Tuesday on reports that Chipotle was forced to close one of its Virginia restaurants due to an illness outbreak and was down another 2 percent Wednesday morning.

Here’s a breakdown of what Wall Street had to say about Chipotle stock following the news.

BMO Capital Markets analyst Andres Strelzik downgraded Chipotle and said media coverage of the outbreak is just as important as the severity of the outbreak itself.

“While norovirus at a single location is not overly significant on the surface, we believe there is greater uncertainty now as there is a reasonable probability that media coverage will outweigh the severity of the incident and create renewed same-store sales weakness, expanding downside risk within our framework,” he wrote.

Another round of food safety headlines creates uncertainty for investors in coming quarters, Raymond James analyst Brian Vaccaro said.

“This news creates incremental near-term sales uncertainty in an already fragile comp recovery versus very easy comparisons in 1H:16 (per store sales volumes are still >15% below pre E Coli levels),” he wrote.

Cowen analyst Andrew Charles said the Virginia incident is likely isolated and not early signs of a larger outbreak to come.

“However, we do not view the pullback as a buying opportunity given uncertainty around consumer reaction to the ensuing headlines,” he wrote.

Related Link: Chipotle's Reputation Risk Has Grown Too High To Support Valuation, Wells Fargo Downgrades

Wells Fargo analyst Jeff Farmer also threw in the towel on his bullish outlook for Chipotle and downgraded the stock on the news.

“Only 16 months removed from Chipotle’s last food scare, we believe consumer response to Tuesday’s norovirus headlines could be amplified with Chipotle still building back food safety credibility with many consumers,” he wrote.

At time of publication, the stock traded at $367.42.

While Wall Street is mostly bearish on Chipotle following the restaurant closure, some firms are more bearish than others:

• Raymond James has an Underperform rating and $392 price target.
• Cowen has a Market Perform rating and $440 price target.
• BMO Capital Markets has a Market Perform rating and $350 price target.
• Wells Fargo has a Market Perform rating and $375 price target.

Image credit: Mike Mozart, Flickr